Factory output at 8.4 per cent packed a punch touching a 25-month high in November. It succeeded other key metrics like core sector data, which grew at a sensible 6.8 per cent and rising auto sales, including that of trucks, indicating an uptick in commercial activity. The bright and breezy monthly upward change in disparate economic indicators imply that the country’s growth rate is slow, but has lots of pluck. The upward movement also raises expectations that the GDP could well be above the CSO-estimated 6.5 per cent in FY18. Some believe the government projection was rather conservative, arrived based on the past seven months data, and without factoring in scope for better performance, as reflected in the improved IIP data.
The reason why the November industrial output reinforces the growth story is because all the six sub-sectors did better sequentially with exceptional growth witnessed by the troika of mining, manufacturing and electricity that have long been in the dumps. Among all, manufacturing grew by 10 per cent—its first double digit print after the new IIP series was introduced in April 2013. Also, out of the 23 industry groups within manufacturing, 15 saw positive growth indicating that the damage due to GST and demonetisation is now behind us. Likewise, infrastructure and construction grew to a 56-month high riding on the back of the double-digit expansion in steel and cement output. That said, labour-intensive sectors like textiles continue to register subdued performance and may need immediate attention.
But it’s no time to rejoice, as IIP is not the only measure for progress. Higher commodity prices, led by crude, continue to inflate the import bill, while non-gold, non-oil imports, an indicator of underlying investment demand, too moderated to 13 per cent (from 23 per cent) in November. Put another way, the December trade deficit stood at a three-year high of $14.9 billion, confirming fears of widening current account deficit, now estimated at 1.8 per cent of GDP in FY18 as against 0.7 per cent.