Capital Goods Sector Boost July IIP – Below Average Rainfall

We all know that the July-08 India Industrial Production was at 7.1% from 5.4% the previous month. The key reason for the higher than expected rise in the July was the rebound in capital goods up 22% – nearly twice the growth seen earlier this fiscal. Capital goods have a weight age of 9.3% in the overall index of industrial production. There are 53 items that are classified under capital goods and as seen in the table below, 17 of these items recorded growth rates in excess of 25% in Jul08 over Jul07. These include ship building, offshore platforms, turbines, and electric generators.

Rainfall during June 1 to Sept 10 remained 3% below normal. Crop sowing data is also unsatisfactory with sowing down 3% YoY. Our GDP forecasts for FY09 factor in marginally lower agriculture growth of 2% with headline GDP at 7.5%.