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Economy: The road ahead - Views on News from Equitymaster
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Economy: The road ahead
Mar 15, 2007

The January 2007 estimates from the Central Statistical Organisation (CSO) show that the Index for Industrial Production (IIP), the indicator of industrial growth in the economy, has grown by 10.9% over January 2006. Despite this strong performance on the industrial front, sentiment is still subdued due to the recent interest rate hikes and a lacklustre budget. Probably, rightly so! As one digs deeper, the changes in the composition of this current IIP growth lead to disquiet. The Reserve Bank of India (RBI) says the weighted share in growth by the capital goods and consumer goods sectors has actually reduced in the first eight months of FY07 as compared to FY06.

Beginning of the downturn?
(%)   Weighted contribution: Apr-Nov
Sectoral Weight 2005 2006
Mining 10.5 0.5 2.7
Manufacturing 79.4 93.8 91.2
Electricity 10.2 5.6 6.2
Use-Based      
Basic goods 35.6 23.1 27.2
Capital goods 9.3 19.4 16.2
Intermediate goods 26.5 8.5 27.5
Consumer goods 28.7 49.2 29.4
Source: RBI Third Quarter Review

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