India’s factory output grew at a five-month high of 3.8% in November from a 4.2% contraction the previous month, holding out promise about an industrial turnaround amid budding signs that companies have begun adding capacities, data released on Monday showed.
The manufacturing sector, which accounts for 76% of the index of industrial production (IIP), the closest approximation that measures business activity in the country, grew 3% in November from a contraction of 2.6% in the same month of the previous year.
It had contracted by 7.4% in October, although it was partly because of the string of festival-related holidays such as Dusshera, Diwali, Eid and holidays because of polls in two of India’s biggest industrial states — Haryana and Maharashtra.
Latest data showed that capital goods output, a proxy for investment activity, grew 6.5% in November from 0.1% a year ago.
Consumer durables output, however, contracted 14.5% during the month, although this could be partly due to shutdown in Nokia’s Chennai plant because tax-related disputes.
Output of telephone instruments including mobile phones and accessories fell 67.3% during the month, mirroring faltering operations at the Nokia plant.
On the positive side, however, automobile makers wheeled out 17% more vehicles in November compared to a year ago to meet the spurt in car sales, amid anticipation that the government could roll-back excise duty cuts and make vehicles costlier from January 1.
Business leaders demanded a cut in interest rates, despite a rise in inflation, to aid the industrial revival.
“There has been marginal rise in retail inflation in December. However, this should not prevent the Reserve Bank of India from cutting benchmark interest rates in its forthcoming monetary policy announcement and moving lockstep with the government to put the focus back on growth. This assumes importance as investments have not shown a significant pick-up and consumer durables continue to show a muted performance,” said Chandrajit Banerjee, director-general, Confederation of Indian Industry (CII).
“There is a sense of optimism in the industry with the steps taken by the government,” Ficci president Jyotsna Suri said.