YOU ARE HERE: LAT HomeCollections

Industrial data raise hopes in India

Output rose 11.5% in the last fiscal year, hinting economic vitality is spreading beyond tech.

June 15, 2007|Henry Chu | Times Staff Writer

NEW DELHI — Old-fashioned industry in India grew 11.5% in the last fiscal year, boosting hopes of broader-based economic growth in a country that has seen rapid expansion of high-tech and back-office services.

Figures released by the Indian government this week showed a rise in productivity in traditional sectors such as manufacturing, mining and electricity, which contributed to the nation's overall annual growth rate of 9%, one of the world's highest.

The 11.5% increase in industrial output was recorded from April 2006 through March 2007, according to the Indian Ministry of Statistics. Preliminary indications point to the trend continuing: In April of this year, industrial output was up 13.6% compared to the same month last year.

India's GDP now stands at about $1 trillion, according to an April report by Credit Suisse, about one-fourteenth that of the United States.

The robust industrial growth is welcome news for Prime Minister Manmohan Singh, whose government has put a premium on spreading more widely the fruits of India's impressive, but uneven, economic boom.

Marquee sectors such as computer software and call centers have built a global profile and grown at a scorching pace, but they account for a relatively minuscule number of jobs. Information technology, for example, employs between 1 million and 2 million workers, well under 1% of a workforce of about 400 million people.

Critics have said that India is trying to vault from an agricultural to an information-based economy without passing through the traditional hoop of industrialization, a stage that usually creates opportunities for mass employment.

The new figures are fueling optimism in some quarters that the Indian economy is developing in a more well-rounded way. Although industry here still lags far behind that of China, where factories have sprouted all over the countryside, rising trade in items such as automobile parts, pharmaceuticals and textiles helped trigger a 12.5% expansion in Indian manufacturing during the last fiscal year. Some economists, however, cautioned against equating such growth with an automatic increase in jobs.

Some of the hike in industrial output is due to more mechanized production and greater efficiencies rather than a swelling of the labor pool.

"India's track record in creating jobs is not that great," said analyst Paranjoy Guha Thakurta. "It's early ... to say whether the growth is more broad-based and whether it's more inclusive."

Also, he said, some sectors, such as information technology services, could decelerate because of the rupee's strength against the dollar. The Indian currency has gained more than 7% on the dollar since the beginning of the year.

The strong performance of industry has been accompanied by signs that inflation has slowed after pushing 7% earlier this year.

The government reported last week that the wholesale price index had dipped to a 10-month low of 4.85% at the end of May, below the psychological threshold of 5%, the target set by the Reserve Bank of India. Much of the drop was due to lower food prices, but the bank is not expected to roll back the interest-rate hikes it has adopted to curb inflation.

Earlier this year, soaring prices for food staples such as onions and lentils exacted a heavy financial toll on ordinary Indians, up to two-thirds of whom make less than $2 a day.

Analysts are closely watching the coming monsoon season, whose rains determine much of the country's farm output and, therefore, food prices.

The majority of India's 1 billion people still rely on agriculture for their livelihoods, but farming's share of the economy has plummeted by more than a third over the past 20 years.

Los Angeles Times Articles