Bouncing back from a long period of sluggish growth, industrial production grew at a nine-month high of 5 per cent in February.

This strong show is primarily due to better-than-expected performance of manufacturing and mining sectors.

In the same month last year, factory output had contracted 2 per cent.

This latest factory output print is also higher than the upward revised January 2015 growth of 2.77 per cent (2.6 per cent projected earlier)

While manufacturing — which has 75 per cent weightage in IIP — grew 5.2 per cent in February 2015, mining grew 2.5 per cent (2.3 per cent).

For April-February 2015, the IIP grew 2.8 per cent (-0.1 per cent), official data released by the Central Statistics Office (CSO) on Friday showed.

The factory output performance in February was a clear pointer to the industrial recovery taking root and an impending turnaround in the investment cycle, said the new CII President, Sumit Mazumder.

“What is heartening to note is that the capital goods sector, which is a gauge for investment demand, has shown an improved performance indicating that investment activity is gradually gaining traction due to improved sentiment and a pick up in new business and foreign orders,” Mazumder said.

Consumer non-durables

This is supported by the impressive performance of consumer non-durables, indicating a pick-up in both consumption and investment demand, he said.

In February, consumer non-durables grew 10.7 per cent (2 per cent). There was also strong show on the capital goods output front, which grew 8.8 per cent (-17.6 per cent)

Terming the February industrial performance as “encouraging”, Assocham President Rana Kapoor hoped the RBI policy rates would move down a bit in the coming months to provide further impetus to the growth sentiment.

“The policy must support creation of more production capacities and in ensuring adequate supply response on one hand and boost the demand growth on the other,” he said.

Reacting to the IIP numbers, FICCI Secretary-General A Didar Singh said interest rates need to be brought down further to stimulate investments and demand and more steps are necessary to improve the business regulatory environment.

Anis Chakravarty, Senior Director, Deloitte in India, said the latest IIP numbers were surprising even if the base effect from last year is taken into account.

Capital goods expand

There were some encouraging signs as capital goods expanded for the fourth straight month at 8.8 per cent, while basic goods production continued their impressive performance printing in at 5 per cent.

“Going forward, we are likely to see the effects of the push to infra projects by the government and the ‘Make in India’ campaign. These are likely to give an impetus to capital goods production and bode well for overall industry and trade,” he said.

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