Factory output rebounds in India



Indian labourers work on a construction site near the international airport in Mumbai. Official data showed yesterday Indian industrial production returned to growth in November, rising 5.9 percent

Indian industrial production returned to growth in November, rising 5.9 percent on an annual basis led by expansion in the manufacturing sector, government data showed yesterday.
The performance was stronger than analysts’ expectations and showed Indian industry bouncing back from contraction in October, when output shrank a revised 4.7 percent year-on-year.
Analysts counselled, however, that the data still revealed weakness in the sector, which has been hit by an aggressive cycle of interest rate rises and weak export demand caused by global economic uncertainty.
Output of capital goods such as machinery – a key indicator of investment and future production – fell again, contracting 4.6 percent on an annual basis.
The president of industry lobby group FICCI, Harsh Mariwala, said demand for capital goods and chemicals was still weakening, even though output of consumer goods had risen sharply.
“It is important that the growth in these two basic sectors is revived for any sustainable growth of manufacturing,” he said in a statement.
Finance Minister Pranab Mukerjee called the new figures a “good sign” and suggested they portended a stronger showing in the near future.
“But for that, we need to take some proactive actions about which I cannot comment on right now,” he told reporters, hinting that new policies were required to help industrial groups.
The Federation of Indian Chambers of Commerce and Industry has been critical of the central bank’s persistence in raising interest rates to control inflation despite evidence of softening domestic and foreign activity.
The Reserve Bank of India (RBI) has raised rates 13 times since March 2010 as it battles inflation that has been nudging 10 percent on an annual basis but has now begun to fall.
“Now that the inflation is going down and industrial growth remains fragile, the RBI should reduce interest rates as soon as possible to revive investments,” Mariwala added.
Food inflation, a key driver of the headline rate, has finally fallen into negative territory for the first time in six years and the next monthly figures are expected to be crucial for the central bank.
“I think the December numbers will clearly indicate what actions the RBI should take,” C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council and a former central bank governor, told the CNBC TV18 channel.
“It largely depends on the extent of decline in inflation in the December numbers,” he said.
The RBI left the key lending rate unchanged at its December meeting and will next meet on January 24 to review its policy.
Rupa Rege Nitsure, chief economist at India’s Bank of Baroda, said the industrial growth figures for November were positive after the contraction in October, but did not necessarily point to a sustained recovery.
“The IIP [index of industrial production] growth has pleasantly surprised, but there are concerns over its sustainability,” Nitsure said.

AFP