Industrial output growth rebounds to 8.8% in June

India's factory output grew at a faster 8.8% in June, compared to 5.9% in May, driven primarily by robust growth in the manufacturing and capital goods sectors. HT reports.

India’s factory output grew at a faster 8.8% in June, compared to 5.9% in May driven primarily by robust growth in the manufacturing and capital goods sectors, rekindling hopes of a turnaround in industry stung by rising input prices and costlier borrowing.

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Manufacturing, which accounts for nearly 80% of the index of industrial production (IIP), clocked a growth of 10% in June compared to 5.6% in the previous month. Capital goods grew at 37.7%, while consumer durables and non-durables production grew at slower 1% and 2.1% , respectively.

Electricity production also improved, witnessing a growth of 7.9%, as compared to a growth of 3.5% in June, 2010.

Finance minister Pranab Mukherjee termed the growth rate as “encouraging.”

Planning Commission deputy chairman Montek Singh Ahluwalia said: “I am glad that the latest figures show improvement. I think it is broadly along the lines that we have been talking about for the current year.”

All eyes will now be on the Reserve Bank of India (RBI), which will present a mid-quarter policy review next month.

The RBI has raised the repo rate, the rate at which banks borrow from the central bank, by 11 times in the past 16 months to cool inflation, which was 9.44% in June. A higher repo raises banks’ borrowing costs, which in turn would raise interest rate on final home, auto and corporate loans.