Industrial production grows to 19-month high of 4.7% in May - Chandigarh Tribune

Industrial production grows to 19-month high of
4.7% in May
Sanjeev Sharma
Tribune News Service

New Delhi, July 11
Though industrial production hit a 19-month high of 4.7% in May, analysts have cautioned on the sustainability of the trend given the low base effect and poor monsoons. Industrial growth was better due to improved performance of manufacturing, mining and power sectors and higher output of capital goods.

The output, as measured by the Index of Industrial Production (IIP), had contracted by 2.5% in the same month of last year. The IIP's previous high was recorded in October 2012 at 8.4%. For April-May, the output has grown by 9.3%, compared to the contraction of 2.1% in the first two months of 2013-14.

Aditi Nayar, senior economist, ICRA, said the improved merchandise trade contributed to the encouraging pickup in the growth of the IIP to a 19-month high 4.7% in May 2014. 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% contraction in industrial output in May 2013.

Nayar said 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.

Sidharth Birla, president, FICCI, said while it is reassuring to see some pick-up in the growth of manufacturing in May but it needs to be seen in the context of negative base.

"The encouraging sign is the broad-based growth as 16 out of 22 sectors have shown positive growth in manufacturing", said Birla.

As the growth is subdued in intermediate sector and capital goods growth also comes on a negative base, the manufacturing sector may take some more time to recover, he said.

Commenting on the IIP figures released for May, Chandrajit Banerjee, director-general, CII, said the rise in industrial production for the second month in a row provides a glimmer of hope that the economy could be bottomed out and recovery could be on the anvil.

Going forward, CII anticipates a further rebound in industrial production as the reform-oriented and forward looking Budget would boost business confidence leading to the turnaround of the investment cycle.