Factory output bounced back in April, growing 3.4 per cent, the highest in 13 months while retail inflation for May eased to 8.28 per cent, buttressing hopes that the economy is headed for a rebound and that the inflationary spiral is ebbing.
More importantly, the industrial output data showed a sharp uptick in the capital goods sector — considered a proxy for investment sentiment. The data estimates come a day after the export data for May registered a double-digit growth of 12.4 per cent, the highest in the last seven months, on back of improving global demand.
Buoyed by the numbers, industry said that quick and proactive government policies are needed to return the ‘feel good’ factor and boost growth.
According to the index of industrial production (IIP) data released on Thursday, the power and capital goods sectors posted a robust growth and improvement in mining and manufacturing production. The IIP was in the negative in February and March, contracting 1.9 per cent and 0.5 per cent respectively.
During April, electricity generation jumped 11.9 per cent as against 4.2 per cent in the year-ago period while mining grew 1.8 per cent against a contraction of 3.4 per cent in the year-ago period. The manufacturing sector grew 2.6 per cent as against 1.8 per cent in April 2013.
The sharp rebound, however, was mainly on account of the capital goods sector, which posted an impressive growth of 15.7 per cent during the month as against a contraction of 0.3 per cent in the corresponding period last year.
“Growth trends look relatively better and confirm our belief that the economy has bottomed out,” said Indranil Pan, chief economist, Kotak Mahindra Bank, said.
Meanwhile, retail inflation, as measured by consumer price index (CPI), slid to a three-month low of 8.28 per cent in May as against 8.59 per cent in April as the price of vegetables, cereals and fuel eased. Food inflation cooled down to 9.40 per cent from 9.66 per cent in April with vegetables becoming cheaper.
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