Source: The Economic Times, Jan 13, 2017
Has the economy dodged a bullet? It may be too early to say but initial reports of industrial and economic activity in November and December show mild-to-strong growth in some sectors, belying fears of a calamitous fall in performance due to demonetisation.
ET Intelligence Group’s analysis of various economic indicators in December reveals growth in rail freight, port tonnage, fuel consumption and power generation. Tractor sales are up and industrial output for November rose 5.7 per cent contradicting expectations of tepid growth.
Capital goods output was up 15 per cent in November, the first time the sector has grown in nearly a year. Two-wheeler sales were down in November and December, but Maruti’s car sales grew 5 per cent in December in rural areas.
Auto industry executives are already talking of a rebound to pre-November 8 levels for cars. Data for December, to a large extent, captured the full impact of demonetisation since some upfront payments may have been made in old currency notes before November 8.
Data from the Central Electricity Authority show power generation, which is considered a proxy to the trend in industrial activity, grew 6 per cent yearon-year, nearly twice the pace in December 2015.
Power plants in south India led the overall growth. Other key indicators of industrial activity such as rail freight, diesel consumption and port tonnage also grew in December.
Rail freight grew 4 per cent compared with a 5.4 per cent drop a year ago. Container Corporation, India’s largest rail freight operator, continues to retain its volume guidance for the fiscal.
“We are confident of meeting our predemonetisation target of 8 per cent volume growth for FY17,” V Kalyana Rama, chairman, Concor, told ET. Port tonnage grew 13.7 per cent compared with just 2 per cent a year ago. Diesel consumption rose by 1 per cent in December.
Nearly 33 per cent of the total diesel consumption is on account of commercial activities, according to a study by Petroleum Planning and Analysis Cell. November data for the Index of Industrial Production shows demand remained relatively unaffected.
It also underlines the strong performance of the electricity sector. Manufacturing and electricity generation grew 5.5 per cent and 8.9 per cent, respectively — the highest in the past one year.
Consumption of petrol and aviation turbine fuel grew 12 per cent and 13 per cent in December while demand for pet coke, used chiefly in cement manufacturing, jumped 28.8 per cent.
Contrary to fears, rural areas recorded growth in tractor and passenger car sales. Tractor sales grew 8 per cent while Maruti Suzuki recorded 5 per cent rise in rural sales in December.
Rural sales account for nearly one-third of the company’s volume. Rabi sowing, indirect tax collection and fertiliser consumption have shown improvement in December.