India’s industrial production growth signals revival

Industrial production grew fastest in 19 months at 4.7%

Update: 2014-07-12 06:48 GMT
Graphical view of Industrial production growth
New Delhi: Acting as a catalyst for the new government, India’s industrial production (IIP) grew fastest in 19 months at 4.7 per cent in May due to good performance by manufacturing, mining and power sectors.Manufacturing sector grew by 4.8 per cent in May compared to a contraction of 3.2 per cent a year ago.The mining sector also witnessed a positive growth of 2.7 per cent in May as against a contraction of 5.9 per in the same month last year. Electricity generation increased by 6.3 per cent in May as compared to 6.2 per cent corresponding month of last year.
 
Industrial production had contracted by 2.5 per cent in the same month of last year.“Improved merchandise trade contributed to the encouraging pickup in the growth of the industrial to a 19-month high 4.7 per cent in May. However, some caution is warranted with regards to the sustainability of this uptick, which came on the back of a benign base effect with a 2.5 per cent contraction in industrial output in May 2013,” said Aditi Nayar, senior economist at rating agency ICRA.
The  previous high in industrial production  was recorded in October 2012 at 8.4 per cent. 
 
“Although sentiments have improved substantially post the strong verdict in the Parliamentary elections, the unfavourable monsoon rainfall so far may cast a cloud on consumer confidence, through channels such as low agricultural output and income growth in rural areas and high food inflation in urban areas,” said Ms Nayar. 
She said that continued expansion of mining activity for seven consecutive month is a favourable development, partly benefiting from the gradual resolution of issues related to iron ore mining.
 
The consumer goods grew by 3.7 per cent in May compared to the contraction of 6.6 per cent a year ago. The consumer durables (fans, TVs, ACs, washing machines) grew by 3.2 per cent in May as against a decline of 18.3 per cent previously. Cons-umer non-durables also grew by 3.9 per cent, compared with a growth of 3.8 per cent in May last year.

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