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Industrial output skids to 5.3%

March 12, 2008

Industrial output growth fell to 5.3% y-o-y in January from 7.7% in December, below expectations, because of a sharp slowdown in the manufacturing sector.

Capital goods output, a lead indicator of investment activity, slowed to 2.1% y-o-y in January from 16.6% in December. A single month does not make a trend, but this is worrying nevertheless since investment has been the main driver of India’s strong economic growth in recent years.

Consumer durables continued to underperform, with the growth rate falling to -3.1% y-o-y in January from 1.2% in December.

Mining and electricity sector output growth remained sluggish at 1.8% y-o-y and 3.3%, respectively, in January, likely reflecting capacity constraints.

Wood products, one of the best-performing sectors, saw output growth plunge to -4.6% y-o-y in January from 31.3% in December

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