Hopes of an industrial rebound sprung anew on Thursday after India’s factory output grew by 5.9% in November, a sharp rise from a contraction of -4.7% in October.
Buoyed by strong output numbers in coal, cement, electricity and refinery products, as well as consumer durables, the overall index of industrial production (IIP), bounced back to record its fastest growth since June.
Consumer durables output grew by 11.2%, mirroring higher production of goods such as televisions and refrigerators.
Capital goods output, however, contracted by -4.6% , an indication that companies, hit by rising borrowing and raw material costs, are holding back capacity expansion plans.
“We need to build on this recovery with a stronger performance of capital goods and therefore investments, to recover the growth momentum in the remaining months of the current fiscal,” said finance minister Pranab Mukherjee. “Policy focus will have to be accordingly adjusted.”
Recent data have also pointed to a sharp rise in factory activity in December driven by domestic sales, although exports growth fell to a nearly two-year low.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI) rose to 54.2 last month from 51.0 in November — the strongest improvement since June. PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 500 manufacturing companies. A figure above 50 indicates growth while a figure below indicates contraction.