India's industrial output grew 5% in February, the fastest pace of expansion in three months on the back of an improving manufacturing sector and robust growth in electricity and capital goods sector. The data should bring cheer to policy makers, who are battling to revive growth in the industrial sector and help overall growth in the months ahead.
Data released by the Central Statistics Office (CSO) showed the growth in February is higher than the upwardly revised 2.8% growth in January. Industrial production fell 2% in February last year.
The manufacturing sector, which accounts for nearly 80% of the index of industrial production, rose 5.2% in February compared to a decline of 3.9% in the year earlier period. The mining sector grew 2.5% in February compared to 2.3% in February 2014. The capital goods sector, which is a key gauge of the industrial activity, rose 8.8% in February compared to a decline of 17.6% in the same period last year. Some signs of improvement were visible in the consumer goods sector, which rose 5.2% in February compared to a decline of 5.2% in February 2014, while consumer non-durables sector shot up 10.7% compared to a decline of 2.07%.
Green shoots of recovery have been visible in the industrial sector, which has been hit hard in the previous months by a string of factors, including slowing demand, sluggish investment and high interest rates. Policy hurdles had also hit the mining sector but a series of steps by the NDA government have helped revive stalled projects. Economists said the data pointed to some revival in demand but urged caution. “Mining and manufacturing sectors appear to have picked up pace. This is reflective of policy actions in terms of faster clearances of projects. The pick-up in manufacturing activity is also suggestive of rising demand,” Care Ratings said. “However, as credit growth remains lacklustre, it would be premature to conclude that IIP would record similar growth going forward as that seen in Feb '15. The impact of rate cuts, Make in India and coal auctions will be seen only in the later parts of FY16,” the agency said.
