Factory output grows at 2.6%, raising hopes of recovery

Industrial production grew 2.6 per cent in July, expanding for the first time in three months, on improved performances in the manufacturing and power sectors, raising hopes of a recovery and expectations the RBI will cut interest rates to boost consumer demand.
Factory output measured in terms of the Index of Industrial Production (IIP) had contracted 0.1 per cent in July last year. It had dipped 1.78 per cent in June and 2.8 per cent in May this year.
"It's good news. It indicates a revival in industrial growth. I believe the phase of negative growth is coming to an end. Growth will pick up in coming months," said C Rangarajan, Chairman of the Prime Minister's Economic Advisory Council.

Commenting on the data, CII Director General Chandrajit Banerjee said, "This is welcome, though it is too early to presume that a recovery is under way...In the very short term, of course, an easing of benchmark rates by the RBI would provide the much needed demand traction which has been ailing segments like consumer durables."
As per data released by the Central Statistics Office today, the IIP contracted 0.2 per cent during April-July.
The manufacturing sector, which constitutes over 75 per cent of the index, grew 3 per cent in July compared with zero growth a year earlier. During April-July, the sector saw a decline of 0.2 per cent compared with a contraction of 0.6 per cent in the period last year.

Power generation increased 5.2 per cent in July from growth of 2.8 per cent in the same month in 2012. Electricity output in April-July grew 3.9 per cent compared with 5.5 per cent a year earlier.
Output of capital goods, a barometer of demand, grew 15.6 per cent compared with a 5.8 per cent decline in the same month a year earlier. During April-July, capital goods production grew 1.8 per cent compared with a drop of 16.8 per cent in same period last year.