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India’s recovering, spending again

business Updated: Aug 13, 2009 07:49 IST
HT Correspondent

The country’s factory output rose 7.8 per cent in June — the highest growth in 16 months — triggering hopes of a strong economic rebound.

Manufacturing, accounting for 80 per cent of industrial output, grew by 7.3 per cent.

<b1>But the real story lay in the consumer durables sector that grew by 15.5 per cent, reflecting a rise in consumer demand and spending on goods such as televisions and refrigerators.

“I expect positive trends [in industrial growth] to continue,” said Montek Singh Ahluwalia, deputy chairman, Planning Commission. “However, the weak monsoon could have some impact on GDP.”

Earlier data, including that of automobile production, had indicated that industrial output would expand in June, even though exports faltered.

The infrastructure sector grew 6.5 per cent from a year earlier, but exports contracted by 27.7 per cent to $12.8 billion (Rs 64,000 crore) in June, the ninth straight monthly fall.

But, if rains continue to play truant, the scattered green shoots of recovery may wither.

Analysts said the consumer durables sector could well bear the brunt as a fall in farm output and income can have adverse multiplier effects.

In past few years, there has been a rise in rural consumer spending. In many sectors — like automobiles — it accounts for 40 per cent of total sales.

The key question is whether this trend can be sustained.

“There are both tailwinds and headwinds to industrial output growth,” said Sonal Varma, analyst with Nomura Financial Advisory Securities. “On the positive side, the global economy is recovering. On the downside, the risk of a deficient monsoon hurting industrial output growth is real.”