Factory output slows in August

In what could be the first signs of Indian economy showing signs of a turnaround, industrial output in August clocked a better-than-expected growth of 2.7 per cent, reversing the trend of contraction witnessed over the past few months.

Factory output, measured in terms of index of industrial production (IIP), had grown by 3.4 per cent in the year ago period. It had contracted by 0.2 per cent in July and by 1.8 per cent in June.

According to data released by Central Statistics Office, industrial output during April-August period stood at a meagre 0.4 per cent. This is significantly lower than 5.6% recorded in the corresponding period of previous fiscal.

“Although growth in industrial production by 2.7% in the month of August has surprised on the positive side, it can be attributed mainly to a low base effect,” said Bhupali Gursale, Economist, Angel Broking.

Manufacturing, which has nearly 75 per cent weightage in the IIP, posted a growth of 2.9 per cent in August. In the year ago period, manufacturing had clocked a growth of 3.9% . In the first five months of the fiscal, growth in the manufacturing sector was flat as against 6% in the year-ago period.

“IIP numbers indicate there is some turnaround as far as manufacturing sector is concerned. I do expect in coming months the growth rate will further pick up and for year as a whole we can still see manufacturing growth at 3-4 per cent,” said C. Rangarajan, Chairman, Prime Minister’s Economic Advisory Council.

Analysts and India Inc, however, expressed concern over the sharp dip in electricity output growth to 1.9 per cent in August from 9.5% in the year ago period.

“What is of serious concern is the sharp drop in electricity production even as the manufacturing sector continues to stagnate due to faltering investments,” said Chandrajit Banerjee, Director General, CII. Expressing disappointment over the IIP numbers, industry has demanded rate cut from the RBI to kickstart investments.