Factory output up 2.7% in August

Suggesting an upturn in industrial activity, India’s factory output grew 2.7 per cent in August helped by an improvement in mining, manufacturing and power sectors, but still remained weak, prompting  India Inc to ask for an interest rate cut by the Reserve Bank of India this month-end.

The government also revised the July industrial output reading to a 0.2 per cent contraction from the 0.1 per cent expansion it reported earlier.

Manufacturing, which constitutes about 76 per cent of industrial production, grew an annual 2.9 per cent from a year earlier, the official data showed. The mining sector grew at 2 per cent emerging from a contraction of (-) 5.5 per cent year-on-year.

The consumer durables and consumer non-durables recorded growth of 4 per cent and 5.8 per cent respectively, with the overall growth in consumer goods recording 5.0 per cent.

Reacting to the August IIP numbers, Prime Minister’s Advisory Council Chairman C Rangarajan said the industrial output is likely to pick up from September on lower base effect and also revival in demand.

“IIP data do indicate that there is some turnaround as far as manufacturing sector is concerned. Manufacturing sector slumped very much in the second-half of the last fiscal.

Therefore this will give a favourable base effect,” Rangarajan said. He, however, expected industrial output to grow at a weak level of 3-4 per cent, probably the slowest growth in nearly a decade.

“I do expect in the coming months growth rate will pick up and for the year as a whole we can still see growth at 3-4 per cent (both for manufacturing and IIP),” Rangarajan said.

However, a disappointing September Consumer Price Index (CPI) number, printed at 9.73 per cent, which was way above the central bank’s comfort level, made the rate cut chances look slim.

Rangarajan said the RBI monetary policy stance will be largely determined by the behaviour of inflation.

“We have yet to see the inflation figure for another month, which will come next week. This will clearly indicate in what direction RBI will move,” the PMEAC chief said.