The Telegraph
Saturday , July 12 , 2014
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Industry output looks up in May

New Delhi, July 11: Industrial output expanded 4.7 per cent in May, the highest since October 2012, on account of increased activity in manufacturing, mining, electricity and capital goods, providing an impetus to the budget proposals of the Narendra-Modi government.

The output, as measured by the Index of Industrial Production (IIP), had contracted 2.5 per cent in May last year.

During the April-May period of the current fiscal, industry growth stood at 4 per cent against a contraction of 0.5 per cent in the corresponding months of 2013-14. In October 2012, IIP growth was recorded at 8.4 per cent.

Manufacturing, which constitutes over 75 per cent of the index, grew 4.8 per cent in May compared with a decline of 3.2 per cent a year ago. Production of capital goods, a barometer of demand, grew 4.5 per cent in May against a contraction of 3.7 per cent in the same month last year.

“While it is reassuring to see some pick-up in growth of manufacturing in May, it needs to be seen in the context of a negative base. The encouraging sign is the broad-based growth as 16 of the 22 sectors showed positive growth in manufacturing,” Ficci president Sidharth Birla said.

“As the growth is subdued in the intermediate sector and capital goods growth also comes on a negative base, manufacturing may take some more time to recover. We are hopeful that the steps taken by the government and the measures announced in the budget will help the sector to revive fast,” Birla added.

In the budget, finance minister Arun Jaitley has promised to revive the economy with a mix of structural reforms and fiscal consolidation.

According to a Yes Bank research report, “Based on the impetus provided in the budget, a fresh leg of investments should give a push to industrial activity. The Rs 10,000-crore venture capital fund for medium and small enterprises, rationalisation of coal linkages and extension of investment-linked deduction for transportation of iron ore along with a 10-year tax holiday to power companies will provide support in the medium term.”

The mining sector grew 2.7 per cent in May against a dip of 5.9 per cent a year ago.

Power generation increased 6.3 per cent compared with a 6.2 per cent growth a year ago.

The output of consumer goods grew 3.7 per cent in May compared with a contraction of 6.6 per cent a year ago.

Aditi Nayar, senior economist with rating agency Icra, said, “Improved merchandise trade contributed to the encouraging pick-up in IIP. However, some caution is warranted with regards to the sustainability of this uptick, which came on the back of a benign base effect.”