In the line with economists’ expectations, industrial output has surprised the country with its numbers, surging to 4.1 per cent in April at a two-month high, primarily driven by the manufacturing sector, while consumer inflation in the month of May has come in line with expectations at 5.01 per cent. The factory output, measured by the Index of Industrial Production (IIP), was 3.7 per cent in April 2014. The industrial growth for March too has been revised upwards to 2.5 per cent from 2.1 per cent, as per the data released by the Government on Friday.
Economists said the positive surprise seen in the IIP numbers affirmed broad economic activity was on the mend while inflation appeared to be headed slightly higher after riding out a few months’ adjustment for base effects, in line with the central bank’s expectation. “In fact, the industrial output numbers have surprisingly come out as per our expectations. As we have seen a lot of economic activities are happing all around, especially in manufacturing sectors, the positive IIP growth is the result of this,” said.
Rupa Rege Nitsure, Group Chief Economist, l&T Financial, adding that the IIP numbers are completely out of sync with the story conveyed by most of the leading indicators. When asked about the impact of deficit monsoon predictions, she said, “For monsoon it’s too early to attach too much weight. What really matters is the temporal and geographic distribution of rainfall. But RBI will remain cautious on this.”
On investment front, she said, “The more the growth is driven by investment, the more it will be non-inflationary.” Manufacturing output, which constitutes over 75 per cent of the index, grew at higher rate of 5.1 per cent in April as against 3 per cent in the same month last year. The production of capital goods, a barometer of demand, however, grew at a slower pace of 11.1 per cent in April as against 13.4 per cent in the same month last year.
In April this year, mining sector too grew at a slower rate. The growth was 0.6 per cent as against 1.7 per cent in April last year. On the other hand, electricity production contracted by 0.5 per cent, while it had expanded by 11.9 per cent in the same month last year. In terms of industries, 16 out of the 22 industry groups in the manufacturing sector have shown positive growth during April compared with the corresponding month previous year.
The industry group ‘Machinery and equipment’ has shown the highest positive growth of 20.6 per cent, followed by 16.2 per cent in ‘wood and products of wood and cork except furniture’, the data said. On the other hand, the industry group ‘office, accounting and computing machinery’ has shown the highest negative growth of 36.5 per cent, followed by 34 per cent in ‘radio, TV and communication equipment and apparatus’ and 26.7 per cent in ‘tobacco products’.