Tuesday, October 13, 2015

Industrial growth zooms to 6.4% in August

Raising expectations of a recovery, August factory output hit a near-three-year high of 6.4 per cent on the back of a strong manufacturing sector performance.

The Index of Industrial Production had expanded a mere 0.5 per cent in August last year. It rose 4.2 per cent in July this year.

The IIP had expanded at 8.4 per cent in October 2012.

The cheer was dampened by the consumer price index (CPI) based inflation rising to 4.41 per cent in September, from 3.66 per cent a month ago with consumer food price inflation surging to 3.88 per cent.

Data released by the Central Statistics Office on Monday revealed that the manufacturing sector, which has a 75 per cent weight in the IIP, grew by 6.9 per cent in August this year compared with a contraction of 1.1 per cent in the same month last year.

Similarly, the mining sector expanded at a robust 3.8 per cent this August against 1.2 per cent last fiscal. However, electricity production slowed to 5.6 per cent against 12.9 per cent in August 2014.

The numbers, indicating a sharp surge in factory output, come less than a month after the Reserve Bank of India reduced key rates by 50 basis points in its bi-monthly monetary policy review to boost growth.

Analysts said domestic demand drove the IIP growth as global demand remains weak.

“This is the highest growth in manufacturing as well as the overall index since October 2012. It is too early to term it as a full blown industrial recovery but a nascent recovery in investment activities seems to have started,” said DK Pant, Chief Economist, India Ratings.

On a cumulative basis, the IIP grew 4.1 per cent between April and August this fiscal.

Pointing to a revival in investment activity, capital goods production grew at 21.8 per cent in August as against a contraction of 10 per cent in the same month last year.

Consumer goods output was also robust at 6.8 per cent, while production of consumer durables jumped up 17 per cent in August.

Base effect

Meanwhile, analysts attributed the rise in the retail inflation to the base effect and said they expect prices to remain high.

“The important point to note is that food inflation has not gone up too sharply despite weather shocks in two consecutive years,” said Pant.

Consumer food price inflation stood at 2.2 per cent in August this year.

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