G Seetharaman

Mumbai: India’s industrial production number for March presented a picture of collapse on Monday: It grew 3%, the slowest since 2002, compared with 8.6% in February.

Is the country facing a serious slowdown?

No way, say economists.

Indranil Pan, chief economist at Kotak Mahindra Bank, has a suggestion: don’t take the IIP index number, which measures India’s industrial activity, seriously.

“The primary reason for the drop is the high base effect last year. I foresee the IIP growing at an average of 7-8% this fiscal,” he said.

High-base effect is a statistical occurrence where, because of extremely high growth last year, the current year’s growth looks low.

For example, in March 2007, the IIP growth rate was a stupendous 14.8%. But the current growth rate of 3% is over that high number.

It’s difficult for a country to grow, say, 10-12% over 14.8%, because chances of the economy going into an inflationary boil, or “overheating”, are very high.

The reaction of Abheek Barua, chief economist at HDFC Bank, is more extreme: He questions the validity of the numbers.

“Looking at manufacturing, of textile machinery and corporate growth in general, it is not possible there has been a drop in IIP growth.” He estimates the IIP growth for March to be actually around 7-8%.

Shuchita Mehta, senior economist at Standard Chartered Bank, said there has been a deceleration in economic activity in the past four months. She foresees ‘a moderate IIP growth’ in the coming months.

With inputs from agencies

Source : DNA