Industrial output grew by 10.4 per cent in August, the highest in 22 months, triggering hopes the worst might be over for the Indian economy.
Manufacturing, which accounts for 80 per cent of overall industrial output, did better than expected, growing by 10.2 per cent. But the real surprise was the consumer durables sector that grew by a healthy 22.3 per cent, the highest in more than five years.
“It (industrial growth) is a good sign and it is a process of recovery,” finance minister Pranab Mukherjee (73) said.
The country’s gross domestic product (GDP) for the April to June quarter grew 6.1 per cent, up from 5.8 per cent in the previous quarter, but the spectre of a drought this year had muted the cheers.
“We are hoping that when the final figure for the second quarter will be available, there will perhaps be some higher growth,” Mukherjee said. “If the higher growth projection is there, then in the third quarter, fourth quarter we can make up.”
Capital markets cheered the numbers with the BSE Sensex gaining 384 points to close at 17,026 points on Monday.
All eyes are now on the Reserve Bank of India (RBI) that will announce the monetary policy later this month. Analysts were not sure whether the latest data could lead to a higher interest rate regime as central bank shifts focus towards containing inflation.
“The latest figures show that demand is growing in the economy,” Harshpati Singhania, president of Federation of Indian Chambers of Commerce and Industry said.
Domestic demand continues to be the key driver of this recovery. Exports are still down with orders from the two key growth regions – the United States and the European Union – remaining low.