Further signs of recovery in India's industrial sector emerged on Wednesday with the latest official data indicating a 7.8 per cent growth in June over the like month the previous year.
Notably, the manufacturing output rose 7.3 per cent during the month, as per the data on the index of industrial production released by the Central Statistical Organisation here.
The data showed that while mining output was up 15.4 per cent, that for electricity rose 8 per cent. Output of capital goods and consumer goods sectors expanded respectively by 11.8 per cent and 4 per cent during the period.
"The IIP figure at 7.8 per cent does no longer look like a flash in the pan. It appears to be an indication of a turnaround in the industrial economy," said Federation of Indian Chambers of Commerce and Industry (Ficci) president Harsh Pati Singhania.
"I believe this is a turnaround because this growth has been registered at a time when our exports have been shrinking. The disaggregated figures show all major industrial sectors making impressive gains," he added.
However, the Ficci president said adequate credit supply at reasonable interest rates was essential to sustain the recovery process.
"This is very important as given the anticipated slowdown in agriculture sector following a bad monsoon, we have to maintain fairly high growth of the industrial and services sectors to support the overall growth of the economy."
According to Sherman Chan, an economist with Moody's Economy.com: "The strong industrial production data bode well for India's June quarter GDP performance. The pickup in domestic activity appears to have been strong enough to offset the slump in external demand."
She said despite the the government carrying a huge debt burden, policymakers have explored alternatives such as public-private partnerships. "Therefore, India's industrial outlook for the short- to medium-term is encouraging," Sherman added.
"Fiscal stimulus measures seem to have also filtered through to manufacturers swiftly, providing much-needed support amid sluggish external orders."
However, Sherman said, given the "much stronger than expected" June results, a brief slowdown was possible in July.
According to Tushar Poddar, an economist with global investment bank Goldman Sachs, the upside from industrial activity likely to mitigate the negative impact of poor rains.
"Several indicators of consumption and investment demand have been showing significant upticks. Financial conditions have continued to loosen over the summer, and we think this mitigates the negative impact from a contraction in the agricultural sector," Poddar added.