NEW DELHI : India’s industrial growth rose to an over five-year high of 9.8% in October from 3.8% a month ago, primarily driven by high double-digit growth in the capital and consumer goods sectors, data released by Central Statistics Office showed.
The statistical effect of a low base also helped push up the growth, as industrial output had contracted 2.7% in October last year. The latest print of the Index of Industrial Production marks the highest growth in India’s industrial output since October 2010, when it had risen 11.3%.
The country’s factory output growth in October was higher than consensus estimates. According to a Cogencis poll of 25 economists, the industrial growth in October was seen at 8.0%.
Apart from solid double-digit growth in capital and consumer goods sectors, the statistical effect of a low base also
helped push up the growth
Output of capital goods and consumer goods grew 16.1% and 18.4%, respectively, in October.
Part of the growth in capital goods and consumer goods, considered indicators of investment and consumer demand in the economy, was due to the base effect as output of the these sectors had contracted in October last year. Within consumer goods, consumer durable goods rose 42.2% in October. Analysts said the better-than-expected growth in October suggests that the manufacturing sector was on the mend.
“I think we are beginning to see green shoots of recovery, which are very visible… the economy is certainly on the mend. It could be a slow process of mend,” HDFC Bank Chief Economist Abheek Barua said.
Among the broad sectors, manufacturing rose 10.6% in October. This sector, which accounts for nearly three-fourths of the total weight of the Index of Industrial Production, had grown 2.9% in September and (-)5.6% a year ago. Electricity sector grew 9.0% and mining 4.7% in October.
The industrial growth numbers are encouraging but one should be careful about interpreting it because of the Diwali “effect”, Chief Economic Adviser Arvind Subramanian said.
“One has to be little bit careful in interpreting this number… as there is a Diwali effect,” Subramanian said. The low base effect got accentuated this month as October last year had less working days because of festivals. Analysts, however, warned that growth can slowdown in November because of a reversal in base effect.
“Clearly the base has provided a support to the strong growth… However, it is unlikely to sustain in next month as the base will not be supportive,” YES Bank Chief Economist Shubhada Rao said.
The industrial output in Apr-Oct, the first seven months of 2015-16, rose 4.8% compared with 2.2% in the same period of last year.
