The industrial output, as measured by the index of industrial production (IIP), continued to post robust growth of 6.8 per cent for the second consecutive month, in July. Industrial growth has clocked positive growth for the seventh consecutive month.
For the first four months (April-July) of this fiscal, the industry grew by 4.6 per cent compared with 5.6 per cent a year ago. The high growth rate comes even as the core sector grew at a low rate of 1.8 per cent in July.
Commerce and Industry Minister Anand Sharma had earlier said that the industrial growth for July was in line with his expectations at 7 per cent. “The industrial growth, though lower than June, is as we had expected and is an indication of recovery,” Sharma had told reporters yesterday.
“The industrial growth has been in line with our expectations. However, we expect it to slow down in the coming months as drought will have an effect on consumer demand, which in turn will affect industrial production,” said Jyotinder Kaur, economist with HDFC Bank.
“The trend is definitely one of revival but it still does not point to a strong recovery. The government spending is basically driving the growth and a neutral monetary policy is expected to continue for the coming months,” said DK Joshi, principal economist with Crisil, a research and ratings agency.
The mining sector grew robustly by 9.9 per cent in July, against a mere 2.8 per cent during the year-ago month.
Manufacturing and electricity sectors grew by 6.8 per cent and 4.2 per cent, respectively, during the month against 6.9 per cent and 4.5 per cent, respectively, in the year-ago period.
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However, all the three sectors registered lower growth in July over the previous month.
In terms of use-based classification of the industry, consumer durables sector expanded by 19.8 per cent in the said month, against 13.9 per cent growth in the year-ago period. Intermediate goods also registered 9 per cent growth against a 3 per cent increase last year. Basic goods grew by 4.8 per cent against 5.3 per cent growth in the year-ago month.
Only capital goods sector perfomed dismally, clocking a mere 2 per cent growth against a robust 17.9 per cent growth in the year-ago month.
Growth of basic goods came down to 4.8 per cent in July from 10.6 per cent in June, while for capital goods the growth came down to 2 per cent from 13.3 per cent registered in June.
“The decline in basic goods during the month is a result of the decline in core sector growth while increase in the automobile, cement and other sectors are driving growth in other categories,” Joshi added.
“As far as the high growth rate clocked in June and July, one needs to keep in mind the volatility of the data. The high numbers constitute inventory adjustments,” Kaur added.