IIP rises 2.7% in May on domestic demand
India’s industrial output expanded 2.7 per cent in May this year, the most since September last year, on the back of strong consumer demand in the domestic market. This is significantly more than the downwardly revised 1.2 per cent in April and betters forecasts of a 1.4 per cent rise.
With 10 out of 17 sectors in the Index of Industrial Production, or IIP, registering growth in May, Finance Secretary Ashok Chawla said the government expected the positive momentum to continue in the coming months.
Output had fallen in December, February and March as Asia's third-largest economy was hit hard by a sudden liquidity crunch and the global downturn.
“We do believe that the worst is over, but there is a difference between the worst being over and getting back to robust growth,” said Montek Singh Ahluwalia, deputy chairman of the Planning Commission.
The manufacturing sector, which has nearly 80 per cent weight in the index, increased by 2.5 per cent as producers are believed to be increasing output to meet anticipated demand.
“Producers in India may have run down inventories during the early stage of the global turmoil, meaning that the decline in production was steeper than the fall in orders, and the recent rise in production could be a result of businesses rebuilding inventories,” Moody’s Economy.com analyst Sherman Chan wrote in a research note.
Rubber, plastic, petroleum and coal products — which have 58 per cent weight in IIP — grew by 16 per cent. This industry group alone contributed 0.8 percentage point in IIP’s growth rate.
Gas production from the Krishna Godavari basin, from which Reliance Industries began to pump gas in April, is seen as a reason why this particular industry sector increased sharply in May. But it could not be verified from government officials.
Food products, which have 90 per cent weight in the index, continued to be in negative territory and declined by 15 per cent.
After being in the negative territory for three months, consumer goods production increased by 1.2 per cent in May, aided by a 12.4 per cent expansion in consumer durables output.