Reversing the trend of contraction in previous two months, factory output grew by a better-than-expected 2.7 per cent in August this year. This, however, was at a slower pace than the 3.4 per cent growth recorded in August last year.
There were mixed views among economists and policymakers on whether the industrial performance for August 2012 reflected any turnaround.
On Friday, the Central Statistics Office (CSO) revised the headline number for July 2012 to (-) 0.2 per cent against 0.1 per cent growth estimated earlier.
The Index of Industrial Production (IIP) had declined 1.8 per cent in June 2012.
For the April-August period, industrial output grew 0.4 per cent against 5.6 per cent growth in same period last year.
The uptick in industrial growth in August was aided by sequential increase in capital goods production besides pick-up in consumer non-durables.
Manufacturing, which accounts for 75 per cent of the index, grew 2.9 per cent in August, lower than the 3.9 per cent growth seen in same period last year.
Reacting to the IIP numbers for August 2012, Prime Minister’s Economic Advisory Council Chairman C. Rangarajan said that these indicate that there is some turnaround as far as manufacturing is concerned.
“I do expect in the coming months the growth rate will further pick up and for the year as a whole, we can still see a manufacturing growth of 3-4 per cent,” Rangarajan said.
He also said that the RBI is likely to decide on the monetary policy action only after seeing the inflation numbers for September.
The RBI is due to come out with second quarter monetary policy review on October 30. Inflation numbers for September are expected to be released on Monday.
T.C.A. Anant, Chief Statistician of India, said that it was too early to say whether a turnaround has come about. “Let us see for the next few months before coming to any conclusion on the trend,” he told Business Line .
Sajjid Chenoy, India Economist, JP Morgan, said that the headline number (for August 2012) was better than expected and the pick-up in consumer non-durables is certainly encouraging.
“But much of the buoyancy was on account of a sequential increase in capital goods production, which is very volatile and could easily reverse next month.
“More generally, I would not read too much into one month’s industrial production report. A sustained increase is needed, if we are to claim the bottom has been reached.”