Mumbai: Industrial output is expected to grow by 5.1 percent in FY'13, higher than last year but below the seven-year average, an economic think-tank has said.
"We expect the year 2012-13 to be below average for the Indian industry in terms of production growth. The index of industrial production (IIP), which is the official measure of industrial growth in India, is expected to rise by 5.1 percent in FY'13," Centre for Monitoring Indian Economy (CMIE) said in its monthly review.
This will be much slower than the average annual growth of 7.9 percent posted by the index between its base year 2004-05 and 2011-12. However, the growth will be much higher than the 2.9 percent in 2011-12, it said.
CMIE expects the projected growth in industrial output to be driven by a strong 10.4 percent growth in electricity generation, whereas output of manufacturing sector and mining and quarrying sector is expected to grow by 4.3 percent and 3.7 percent respectively.
The growth in electricity sector will be the highest one seen in power generation in last 23 years. It will be driven by a sharp 11.9 percent rise in thermal power generation.
"We expect the availability of coal to improve in FY 13 with a 6.8 percent rise in production and a strong 28.3 rise in coal imports, This, coupled with the record capacity addition seen in the last year will accelerate the growth in thermal power generation in FY 13," CMIE said.
The nuclear power generation is expected to grow by 17.1 percent, backed by the 2,000 MW capacity addition by Nuclear Power Corporation. Hydel power generation, however, is expected to remain flat because of poor rainfall and low reservoir levels, according to the review.
CMIE expects the output of mined products to grow by 3.7 percent in FY 13 after falling by two percent in FY12. Production of coal is expected to rise by a healthy 6.8 percent in FY 13, after recording a dismal growth of 1.2 percent in FY 12. The scrappage of go/no-go area classification of coal blocks and fresh capacity additions are expected to help coal companies scale up their output, it said.
Besides, CMIE expects the iron ore production to revive in FY 13, as eight companies in Karnataka with a capacity of 6 million tones have got clearance from the Central Empowered Committee to resume mining from August 2012. And, another 37 companies with a capacity of 22 million tones are expected to resume mining in the next 2-3 months.
CMIE pointed out that the IIP will estimate the growth of the manufacturing sector correctly and will be in sync with the alternate date sources. In FY 12, the IIP had under-estimated the growth of the manufacturing sector, showing a steep 22.2 percent fall in production of electrical machinery and equipments.
"We believe that the machinery industry is unlikely to have seen such steep falls in production, as net sales of over 300 machinery companies listed on the bourses rose by 11 percent in FY 12. This growth could not have been entirely price-driven. Also, projects worth Rs 4.1 lakh crore got completed in FY 12 which must have generated demand for machinery," CMIE said.
CMIE believes that the IIP had under-estimated the growth of the manufacturing sector in FY 12. Had it not been for the machinery indices, the manufacturing index would have risen by 5.3 percent in FY 12, much higher than the three percent growth it reported for the year.