IIP rises to 3-year high of 6.4% in August; retail inflation in comfort zone

New Delhi: Showing signs of recovery, industrial output rose to nearly 3-year high of 6.4 percent in August on improvement in manufacturing and capital goods while retail inflation remained with in comfort zone.

The manufacturing sector, which constitutes over 75 percent of the index, grew by 6.9 percent in August, while the capital goods output rose by 21.8 percent in the month indicating a recovery.

Commenting on the twin macro economic data, Chief Economic Advisor Arvind Subramanian said, "Encouraging news on Indian economy. IIP growth increased to 6.4 percent, consistent with indirect tax revenue performance. Core inflation moderate."

The previous high of factory output growth was recorded in October 2012 at 8.4 percent. The factory output had grown by 0.5 percent in August last year.

Industrial output, measured in terms of the Index of Industrial Production (IIP), was at 4.1 percent in the April-August period against 3 percent in the year-ago period, the data released by the Central Statistics Office (CSO) today showed.

As regard retail inflation, the Consumer Price Index rose to 4.41 percent in September from 3.74 percent in August this year but remained in comfort zone. RBI has projected 5.8 percent retail inflation by January, 2016.

"The growth in manufacturing seems to be accelerating and we are hopeful of higher growth in the coming months.. Government?s efforts to revive manufacturing has started yielding results," said FICCI Secretary General A Didar Singh.

Chief Economist, India Ratings & Research Devendra Kumar Pant said, "Sharp fall in inflation and monetary easing has increased demand for consumer durable. This is partially due to initiation of festival season. Bond market is likely to respond favourably to IIP data and bond yields are likely to fall by around 5 basis points in tomorrow's trade." I

Meanwhile, the IIP growth for July has been revised slightly downwards to 4.1 percent from provisional estimate of 4.2 percent last month.

Commenting on the data, Assocham President Rana Kapoor

said, "..Pleased to see finally the green shoots of economic activity getting converted into strong industrial growth figures."

"On the whole, these estimates put forward certain positive indications of growth revival, however, the policy makers need to continue with the proactive stance to support these developments," he added.

According to IIP data, the manufacturing sector, which constitutes over 75 percent of the index, grew by 6.9 percent in August, 2015 against a contraction of 1.1 percent in the same month last year.

The output of capital goods, a barometer of investment, grew at an impressive rate of 21.8 percent as against a contraction of 10 percent in the same month last year.

The mining sector growth was at 3.8 percent in August against 1.2 percent in the same month last fiscal.

However, power generation growth slowed to 5.6 percent in August as compared to 12.9 percent in the same month a year ago.

The overall consumer goods output grew by 6.8 percent in August as compared to a contraction of 6.2 percent in the same month a year ago.

The consumer durables goods output grew at 17 percent in August as compared to a contraction of 15 percent in the same month a year ago.

The consumer non-durable goods output grew by 0.4 percent in August as compared to 0.4 percent growth in the same month a year ago.

The basic goods output grew by 3.4 percent in August, compared to 9 percent growth a year ago, whereas intermediate goods output grew by 2.6 percent in the month as compared to a contraction of 0.1 percent in the same period last year.

In terms of industries, 15 out of 22 groups in the manufacturing sector showed positive growth in August.