IIP gets push from manufacturing, capital goods sectors

Industrial production up 4.2% in July

Beating estimates, India’s industrial production grew 4.2 per cent in July, backed by good growth in manufacturing and the capital goods sectors indicating that investment has started showing signs of revival in the economy.

It also raised hopes of an interest rate cut in the upcoming monetary policy review later this month. The manufacturing sector, which constitutes over 75 per cent of the industrial production index, grew by 4.5 per cent year on year. In July last year, there was a contraction in the manufacturing sector by 0.9 per cent.

The capital goods grew a handsome 10.6 per cent in July. Capital goods too had contracted in July last year by 3 per cent. The industrial production growth for June too was revised upward to 4.36 per cent from the provisional 3.8 per cent. The mining sector growth was at 1.3 per cent in July against 0.1 per cent in the same month last fiscal.

Within consumer goods, durables surged 11.4 per cent while non-durables fell 4.6 per cent. Terming the IIP numbers for July as encouraging, industry body Assocham said that industrial activity seems to be finally getting revived.

“With prices seemingly under control, the monetary authority must focus on ensuring that cost of finance to the industry becomes competitive,” it said. “It is encouraging to see the positive growth in manufacturing over the last few months, and we hope that this growth and demand will pick up as we are nearing the festive season. There is a potential to take this growth to a higher level with the help of more supportive policies for stimulating domestic demand and exports,” said Ficci in a statement.

However, talking to Deccan Herald, HSBC India chief Naina Lal Kidwai said that the interest rate cut by RBI has nothing to do with the economic growth, instead it is the transmission of rates by the banks that will accelerate the economy. She, however, expressed optimism that the RBI will go in for a 25 to 50 basis point rate cut by the end of the this year as inflation is under control.