The government today said industry, which has grown at the highest pace in over a decade, had been driven by buoyant trade and infrastructure investment spending.
Industrial output, as measured by the Index of Industrial Production (IIP), has increased by 10.2 per cent during the first half of 2010-11, compared to 6.8 per cent achieved during the corresponding period in 2009.
According to the mid-year review released by the government, the robust growth had been helped by infrastructure spending and capacity additions in power, highways and urban infrastructure. Even as in all the three sectors, the government had fallen short of capacity addition targets.
The review also observed that the growth in industrial production had peaked during the last quarter of the previous financial year (2009-10) and had been gradually weakening during the current year, primarily due to moderation in manufacturing and electricity generation.
Industrial production accompanied with service sector guided the overall economic growth in the first half of this financial year, while agriculture remained relatively static due to pass-through effects of a deficit monsoon last year.
However, agriculture is also expected to pick up in the third and fourth quarters of 2010-11 on the back of good harvesting in both kharif and rabi season.
Within industry, manufacturing continued to be the key driver of growth even as other sub-sectors picked up during the first half. Capital goods and consumer durables continued to grow rapidly in the first quarter.
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Despite a decelerating trend in capital and consumer durables groups from the second quarter onwards, the growth has continued to be in double digits. A high statistical base effect has also been a reason in the moderating growth trend.
The mid-year review further noted that basic goods exhibited a similar trait, while consumer non-durables, an important indicator for the health of the rural economy, were yet to recover with their growth rates in low single-digit levels.
Intermediate goods, on the other hand, have maintained resilient growth, registering double-digit growth in both the first and second quarters of the financial year.