Factory output grows sharper than expected at 2.5% in September v/s 0.5% in August

India’s annual industrial output growth, measured by index of industrial production (IIP), expanded more than expected at 2.5% in September after posting growth of 0.5% in August. The cumulative growth for the period April-September 2014-15 over the corresponding period of the previous year stands at 2.8%.

On sectoral basis, growth of electricity index, which occupies 10.32% weightage in the overall index, grew at a slower pace by 3.9% in the reported month as against 12.9% in August, while mining sector output growth too slowed down to 0.7% as compared to 2.6% growth in the previous month.  On the flip side, the output of manufacturing sector, which occupies 75.52% weightage in the overall index, grew by 2.5% in September from a growth figure of 12.9% in August.

The cumulative growth of Mining, Manufacturing and Electricity sectors during April-September 2014-15 over the corresponding period of 2013-14 stood at 2.1%, 2.0% and 10.4% respectively.  On Use-based classification, capital goods production, a barometer for investments in the economy grew by 11.6% for the month under review .The output of basic goods sector grew by 5.1% as against 9.6% in August, while consumer non-durables output grew by 1.5% in September as compared to -0.9% in the previous month. The output of consumer durables sector continued its contraction though with a slower pace, declining by 11.3% in month under review as compared to massive contraction at 15.00% in August, indicating that consumers are reeling under high inflation which is impacting their spending.

This data is definitely a heartening development for Narendra Modi government, which is looking to revive the economy and has taken slew of measures, like deregulating diesel prices, linking gas prices to global benchmarks, amendments to labour policies towards this. Notably, this another piece of reading which strengthens the case for rate cut by RBI In its upcoming monetary policy in December after India’s consumer price inflation eased at another all time low level since the launch of the new series of Consumer Price Index in 2012, at 5.52% in October as compared to 6.46% in September, helped by the lower prices of food and fuel.