Industrial Production in India Grows 2.2% in September; Manufacturing Sector in Broad-Based Expansion

We've been hearing that manufacturing in India has been picking up steam lately. The service sector has had considerable publicity as it has expanded, but manufacturing hadn't seemed as vibrant. So today, when the Central Statistical Organization reported industrial production for September, it caught our eye.

In the month, total, or "general", industrial production gained 2.3% from August and stands 11.4% above September 2006. Gains from 2003 to 2005 averaged 7.6%. The manufacturing sector was a bit slower in the latest month, 2.2%, but it has been stronger than the total over other recent periods, 12.0% over the last 12 months and an average of 8.3% from 2002 to 2005. The strength has occurred in most market segments. Production of basic and intermediate goods have expanded, but in general more slowly than overall industry. In September, both of these categories were strong, with chemicals and metals leading. Final products, particularly consumer durables, have sustained a rapid uptrend over a longer period. Consumer durables output actually declined in September, by 2.8%, but that follows a notable surge since 2004. Capital goods too seem to be pausing in the latest months, but they expanded hugely in 2004 and 2005, by 16.0% and 15.4%, respectively. Even nondurable goods have been gaining at annual rates frequently exceeding 12%.

So what we have heard is true. Manufacturing in India is expanding. We went to the national accounts data to check it against the service sector. The "index" function in Haver's DLXVG3 software makes this easy to do. For gross value added (GVA) in both sectors, we set Q2 2002 = 100, and we see for the last four years that they are right on top of each other. These data are available through Q2 2006. Services expanded more prior to that, but manufacturing has picked up. It accounts for about 15.4% of total GVA, with services at 61.5%.