Industrial growth on upswing, up 7.8 pc in June

Led by a smart recovery in manufacturing sector, industrial production growth accelerated to 7.8 percent in June compared to 2.7 percent a month ago.

Effects of fiscal and monetary stimulus were visible as manufacturing, the worst-affected, grew by a whopping 7.3 percent in June over 6.1 percent a year ago.

With manufacturing constituting about 80 percent in the index of industrial production (IIP), industrial growth at around eight percent in June was way above the 5.4 percent a year ago.

Mining grew by a substantial 15.4 percent and power was up eight percent in June.

For the first time after Lehman Brothers collapsed, segments like capital goods, consumer durables, consumer non-durables did not show contraction in output.

Industrial growth stood at 3.7 percent in the first quarter of this fiscal against 5.3 percent a year ago.

Given the fact that industry started contracting since September, its growth, if this trend persists, will be higher because of a low base.

With the weakening monsoon casting a shadow on farm growth, this kind of industrial growth may offset the adverse impact partly.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said, "I always expect the positive trends (in industrial growth) to continue. However, the weak monsoon could have some impact on overall GDP."

Consumer durables and capital goods grew by 15.5 percent and 11.8 percent, respectively, in June, the strongest expansion in several months.

As many as 12 out of 17 industrial segments in June recorded positive growth. However, processed food continued to decline, along with jute, beverages, tobacco, etc.

Analysts attributed high industrial growth to the impact of stimlus measures taken by the Government and RBI.

Rating agency Crisil Principal Economist D K Joshi said, "This is more than expected. It is mainly driven by the fiscal and monetary stimulus. Interest rate softening has started showing positive impact on the industry. However, monsoon can have a dampening effect on growth."

Manufacturing grew by 3.2 percent in the first quarter against 5.8 percent a year ago, mining by 7.3 percent against four percent, and electricity by six percent against two percent.

Meanwhile, industrial growth in May was revised downwards to 2.2 percent compared to 2.7 percent estimated earlier.