By fe Bureaus
The country s factory output, as measured by the index of industrial production (IIP), expanded 10.4% in August, the most in 22 months, riding on double-digit growth in sectors like mining and manufacturing. The latest data, which beat expectations of economists, strengthens the notion that the economy is on a recovery path, leaving the worst phase of economic slowdown behind. The high growth in August is also attributable to the poor 1.7% growth in the same month in 2008. The government was, however, elated, as was the stock market. While Planning Commission deputy chairman Montek Singh Ahluwalia termed the latest statistic as a very good Diwali gift and dismissed any rollback in fiscal and monetary stimulus measures before the end of 2009-10, Finance Minister Pranab Mukherjee said that the IIP growth is a good sign for the process of recovery. Finance secretary Ashok Chawla expected the trend to continue with better numbers for September. Chief statistician Pronab Sen was more pragmatic. This is mostly because of the base effect. But then, we are climbing out of the crisis that was seen last year. We could see some strong industrial growth numbers after October. But I do not know how the impact of the drought will affect the IIP numbers as it will be felt with a lag. The August numbers do not show the full impact of the drought, Sen told FE. The Central Statistical Organisation, meanwhile, revised upward the estimate for industrial production growth in July 2009 from 6.8% to 7.22%. The IIP figures bolstered the stock market, already in high spirits over patch up signals sent by sparring Ambani brothers. The benchmark Sensex (^BSESN : 16632.01 -222.92) soared by over 380 points to regain the 17,000-level on Monday. Backed by good IIP figures, positive news on the Reliance front drove the market, said brokerage SMC Global vice-president Rajesh Jain. Industrial output, hammered by the economic slowdown, had dipped 0.24% in December 2008, the lowest since the new IIP series began in April, 1993. Since then, the index has been steadily crawling back, as the Rs 1,86,000-crore fiscal stimulus package announced over three tranches helped stimulate demand, especially in the infrastructure sector. The Reserve Bank of India had pruned its lending rate by 425 basis points in the months between October 2008 and April 2009, making it easier for companies to access liquidity. This led to enhanced economic activity, as indicated by the 12.24%-rise in advance tax paid by companies in the second quarter, against a dip of 3.44% in the first quarter. Manufacturing, which accounts for nearly 80% of industry, expanded 10.2% in August, the most since May 2007. Mining production also grew a record 12.9% while electricity generation expanded 10.6%. Increased production of television sets and refrigerators led to a 22.3% growth in consumer durables output, the most since March 2004, attributable to the low, 3.9% in same month last year and an increase in production by factories anticipating festive season demand. Another boost to industrial production came from intermediate goods, comprising components and key ingredients of manufactured products, which grew 14.3% in August, the most since November, 2006. Output from the sector had contracted 5.5% in the corresponding month of 2008. Capital goods production, an indicator of industrial investments, expanded 8.3% in the month against 0.92% a year ago. Consumer non-durables output expanded 3.7% in August, over 7.3% a year ago. Output from this sector will be directly impacted by the drought as many processed food products belong to this category. Reduced farm output because of a rainfall deficit is likely to adversely impact the sector in the months to come. In terms of industry segments, some textile items like man made fibres, wool and silk, wood products, petroleum, rubber and coal derivatives grew in double digits in August.
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) soared by over 380 points to regain the 17,000-level on Monday. Backed by good IIP figures, positive news on the Reliance front drove the market, said brokerage SMC Global vice-president Rajesh Jain. Industrial output, hammered by the economic slowdown, had dipped 0.24% in December 2008, the lowest since the new IIP series began in April, 1993. Since then, the index has been steadily crawling back, as the Rs 1,86,000-crore fiscal stimulus package announced over three tranches helped stimulate demand, especially in the infrastructure sector. The Reserve Bank of India had pruned its lending rate by 425 basis points in the months between October 2008 and April 2009, making it easier for companies to access liquidity. This led to enhanced economic activity, as indicated by the 12.24%-rise in advance tax paid by companies in the second quarter, against a dip of 3.44% in the first quarter. Manufacturing, which accounts for nearly 80% of industry, expanded 10.2% in August, the most since May 2007. Mining production also grew a record 12.9% while electricity generation expanded 10.6%. Increased production of television sets and refrigerators led to a 22.3% growth in consumer durables output, the most since March 2004, attributable to the low, 3.9% in same month last year and an increase in production by factories anticipating festive season demand. Another boost to industrial production came from intermediate goods, comprising components and key ingredients of manufactured products, which grew 14.3% in August, the most since November, 2006. Output from the sector had contracted 5.5% in the corresponding month of 2008. Capital goods production, an indicator of industrial investments, expanded 8.3% in the month against 0.92% a year ago. Consumer non-durables output expanded 3.7% in August, over 7.3% a year ago. Output from this sector will be directly impacted by the drought as many processed food products belong to this category. Reduced farm output because of a rainfall deficit is likely to adversely impact the sector in the months to come. In terms of industry segments, some textile items like man made fibres, wool and silk, wood products, petroleum, rubber and coal derivatives grew in double digits in August.
