The publication by both India and China of their latest industrial production data confirms very rapid economic growth in both countries. This is not only important in itself but is against the view put forward, for example, by Stephen Roach of Morgan Stanley, Bill Emmott the former editor of The Economist, and others, that the major Asian developing economies were incapable of economically 'decoupling' from the US.
Taking first India's data, January's industrial production rose 16.7% year on year. Manufacturing output increased by by 17.9%. The output increase was heavily concentrated in the investment production sector - output of capital goods rose by 56.2%, intermediate goods by 21.3%, and consumer goods by 4.2%. The overall industrial output increase represented only a marginal slowing compared to the revised year on year increase of 17.6% in December - that figure was a revision upwards from the 16.8% initially announced. Overall the figures confirm extremely rapid Indian economic growth.
For China, February's monthly figures cannot be used for meaningful year on year calculations as the long Chinese New Year holiday fell in February this year and in January in 2009 - artificially distorting simple year on year comparisons. The appropriate measure is to compare January and February 2010 with January and February 2009. Taking this China's industrial production was up 20.7% year on year. Light industrial production was up 14.5% and heavy industrial production up 23.7%. Particularly notable advances were in production of transport equipment, up 43.7%, and telecommunications, computers and other electronic equipment - up 26.4%. The rapid increase of production is evident - this blog has previously analysed the successful shift of China into growth driven by expansion of domestic demand and this is confirmed by the continued trend of China's falling trade surplus.
In addition to the inherent importance of the growth data for both India and China these figures throw clear light on the issue of 'decoupling' - that is whether rapidly growing Asian economies would be able to continue to grow at a fast pace under conditions of recession or economic slowdown in the US. The idea that 'decoupling' could take place was strongly argued against, for example, by Stephen Roach of Morgan Stanley and Bill Emmott - former editor of The Economist and a long term analyst of the Asian economies.