Industry at full tilt, July data show

It’s back to the heady days of the mid-1990s: production in the manufacturing sector grew at 13.3% in July, pushing overall industrial production up by an explosive 12.4% in this month alone, the fastest growth in a decade.

As a result, industrial production in the first four months of this year grew 10.6% against 8.9% in 2005-06.

Though manufacturing was the main engine of growth, the mining and electricity sectors also put in a much-improved performance.

Across sectors, though, the improvement seems to have been the result of a low base effect.

Rating agency Crisil’s principal economist D K Joshi, however, feels the figures reinforce the strong industrial performance story. “Even if the base effect is discounted, growth would still have been around 10%,” he is certain.

D H Pai Panandiker, president at RPG Foundation, an economic policy group in New Delhi, told Bloomberg this is this kind of industrial growth that will help the economy to grow as much as 10%.

“With infrastructure improving, India’s economy in future will be driven by its industry,” Panandiker said.

The mining sector seems to have put last year’s poor showing - caused by the fire on the ONGC facility in July - behind it. A 6% growth in July (against -1.9% last year) helped the sector grow 4% in April-July, up from 2.7% in April-July 2005.

The 13.3% growth in manufacturing in just one month could partly be the result of a low base effect - the sector grew 6% in July 2005.

But it is, nevertheless, reminiscent of the manufacturing boom period between December 1994 and June 1996, when manufacturing production logged double-digit growth almost continuously.

The boom period had closed with a 13.4% growth in June 1996, a feat that was repeated only nine years later when the sector grew 13.2% in June 2005.

All segments of the manufacturing sector have done well, including basic and intermediate goods, two sectors that didn’t too well last year.

It’s a sign that the appetite of factories for raw materials and other inputs is growing, putting at rest - at least for now - worries of a slowdown.

The consumer non-durables sector grew a robust 18% in June, sending out a clear assurance that the piffling 1% growth in June was just an unexplained blip.