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Hopes of an industrial recovery in the second half of this financial year receded with the country’s factory output growing at a lower-than-expected 0.6 per cent in August.
The Index of Industrial production (IIP) in August was significantly lower than the July growth figure, which has now been revised upwards to 2.8 per cent from 2.6 per cent earlier. In August 2012, the index grew 2 per cent.
The index was pulled down by the contraction in consumer durables and capital goods.
The latest IIP number was released after market hours on Friday and may impact stock indices on Monday.
Both manufacturing and mining sectors also contracted in August. Manufacturing, which constitutes 75 per cent of the index, declined 0.1 per cent and mining contracted 0.2 per cent.
Anis Chakravarty, Senior Director, Deloitte in India, said there is nothing in the pipeline to re-ignite the manufacturing sector. “Overall, the third quarter will be slightly better for industrial output. But there is unlikely to be a big turnaround,” he said.
While doubts have been raised about the overall growth prospects of the economy, Finance Minister P. Chidambaram has expressed confidence that the economy will grow at 5-5.5 per cent this year. He has based his optimism on an expected robust farm output following a good monsoon and the reform measures over the past one year.
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