IIP grows to 19-month high of 4.7pc in May

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May factory output grew at the fastest pace in 19 months at 4.7 per cent. This was music to the ears of the Modi government, which has been battling the worst economic slowdown in 25 years from Day One in office. As many as 16 out of 22 sectors showed positive growth in May, giving hope of an industry revival.

Economists and analysts reacted cautiously, saying they weren’t sure if the revival in industrial growth was sustainable, given the ‘deficient monsoon’ and the fact that the May IIP outcome was on a low base of 2.5 per cent contraction in output in the prior-year month.

Aditi Nayar, senior economist at rating agency Icra, attributed the revival in industrial activity to improved merchandise trade and an expansion in mining for the seventh consecutive month.

“Deficient monsoon rainfall may cast a cloud on consumer confidence, through channels such as low agricultural output and income growth in rural areas and high food inflation in urban areas,” Nayar said.

Output from mines, power plants and factories grew for the second straight month after a 0.5 per cent contraction in March, government data showed. Food products & beverages, tobacco, textiles, apparels, wood products, chemicals, basic metals, machinery and equipment were some of the major sectors that fueled the jump in factory output.

“As growth is subdued in intermediate sector and the growth in capital goods also comes on a negative base, the manufacturing sector may take some time to recover. We hope that the steps taken by the government and measures announced in the budget would help the sector revive fast,” said Siddarth Birla, president of industry body Ficci.

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