Given the October index of industrial production (IIP) was a huge aberration, thanks largely to a change in the month Diwali was celebrated this year, it’s not surprising that November output contracted by 0.1%. Like all IIP data, the November data has its fair share of imponderables—after exhibiting unexplained high growth since November 2011, publishing contracted 22% in November 2012. But the industry sector growth—and that includes construction—seems to be on track for a 3%-plus growth in FY13. If that happens, though, it’s worth keeping in mind, that will still be much lower than the average of 7.9% in the last decade, and less than half the two-decade average of 6.9%. Capital goods, as can be seen from the order books of most producer firms, continued on its downward dive—it contracted 7.7% in November. Consumer goods seem to have stabilised a bit at a 1% growth in the month while non-durables slowed to a near-standstill at 0.3%.
Much of this, of course, is easily corroborated from other data. Passenger cars grew just 1% in April to November while commercial vehicles contracted 5.6%. Deposits growth in the fortnight ended December 28 grew at 11.1%, a lower growth than that seen in many years. Exports, similarly, continued to fall for the 8th straight month, though the rate of fall seems to have slowed—December exports fell just 1.9% yoy compared to a fall of 4.2% in November. That November's 0.1% contraction was on an unusually high growth of November 2011 suggests some bottoming out.
Whether the sector will grow faster in FY14—4.4% according to Citibank and 5.4% according to Crisil—will, of course, largely depend on how the monsoons fare since new investments continue to fall while the number of stalled projects hasn’t stopped rising. Which means that, apart from FY14 industrial growth being half the 20-year average, it will essentially be a weak one, driven largely by consumption demand that, in turn, will be driven by a possible normal monsoon next year and a likely increase in government expenditure in the run up to elections. More important, unless the investment climate starts improving—NHAI taking its fight with the environment ministry all the way up to the Supreme Court suggests we have a long way to go—the agriculture-driven boost in FY14 can’t even be replicated.