Modi gets a confidence boost: May factory output hits 19-month high of 4.7%

New Delhi: Showing signs of recovery, industrial production grew at 19-month high of 4.7 percent in May due to improved performance of manufacturing, mining and power sectors and higher output of capital goods.

The output, as measured by the Index of Industrial Production (IIP), had contracted by 2.5 percent in the same month of last year.

IIP data for April remained unchanged at 3.4 percent after revision of the provisional estimates released last month, according to the information released by the Central Statistics Office (CSO).

The IIP’s previous high was recorded in October 2012 at 8.4 percent.

During the April-May period of the current fiscal, the IIP recorded a growth of 4 percent, as against contraction of 0.5 percent in the first two months of 2013-14.

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“It shows that things have started improving,” said Rupa Rege Nitsure, chief economist at Bank of Baroda.

She cautioned, however, that weak monsoon rains could deal a blow to any economic recovery.

“Just going by this data one cannot say the trend will necessarily be improving henceforth, given the risks of a deficient monsoon and its impact on the whole consumption side of the economy,” she said.

Manufacturing, which constitutes over 75 percent of the index, grew 4.8 percent in May, compared to decline in output by 3.2 percent a year ago. For April-May, the sector recorded a growth of 3.7 percent, compared to a contraction of 0.7 percent in the year-ago period.

Production of capital goods, a barometer of demand, grew by 4.5 percent in May, in sharp contrast to a contraction in output by 3.7 percent in same month of last year.

For April- May, the output has grown by 9.3 percent, compared to the contraction of 2.1 percent in the first two months of 2013-14.

The mining sector grew by 2.7 percent in May as against a dip of 5.9 percent a year ago. For April-May, the segment grew by 2.6 percent, compared to decline in production by 4.7 percent in the year-ago period.

Power generation increased by 6.3 percent in May as compared to 6.2 percent growth in the same month of 2013. In April-May, power output grew by 9 percent compared to a growth of 5.3 percent in the year-ago period.

Overall, 16 of the 22 industry groups in manufacturing showed positive growth in May.

According to the IIP data, output of consumer goods grew by 3.7 percent in May compared to the contraction of 6.6 percent a year ago. However, in April-May, the segment showed a contraction of 0.7 percent compared to a decline of 2.5 percent the same period of 2013-14.

The consumer durables segment grew by 3.2 percent in May as against a decline of 18.3 per cent previously. For April-May, it declined by 2.5 percent as against a contraction of 14 percent in the first two months of last fiscal.

Production of consumer non-durables also grew by 3.9 percent, compared with a growth of 3.8 percent in May last year. For April-May, the segment has grown by 0.5 percent, compared to a growth of 7.6 percent a year ago.

Output of intermediate goods expanded 2.7 percent in May, compared to 1.1 percent a year ago. For April-May the output has grown by 3 percent, compared to 1.8 percent in the first two months of last fiscal.

Basic goods output grew 6.3 percent in May, against a dip of 0.3 percent a year ago. For April-May, the segment has grown by 6.8 percent compared a growth 0.5 percent in the same period of 2013-14.

Agencies