Factory output gathers pace

Industrial output showed signs of a rebound in September driven by some strength in key infrastructure sectors but the overall picture still remained sluggish.
Official data showed the index of industrial production rose 2% in September, faster than a revised 0.4% in August and higher than a decline of 0.7% in the same period last year. In the first six months of 2013-14, industrial output growth rose 0.4% compared to 0.1% expansion in the April-September period of the last year.
The robust 8% growth in the eight core infrastructure sectors in September, which account for nearly 40% of the index, had raised hopes of a sharp turnaround in overall industrial output. Manufacturing continued to remain sluggish, growing 0.6% in September compared with a decline of 1.6% in September last year.
Economists said the sector continues to remain under pressure and hoped there would be a turnaround in the months ahead. They cautioned that it would be difficult to achieve 1-2% growth if the current situation continues to prevail.

The government is banking on projects approved by the Cabinet Committee on Investment to take off in the months ahead, which would help jump start the investment cycle. It also hopes growth to pick up on the back of farm-led recovery in the second half of the current fiscal. The data showed the capital goods sector, a key indicator of industrial activity declined 6.8% in September compared with a contraction of 13.3% in September last year. This sector has remained volatile in the past and economists have blamed the quality of data for the sharp fluctuations. Consumer sentiment also continued to remain depressed. Consumer durables fell 10.8% in September compared with a decline of 1.5% in September 2012.
High interest rates, stubborn prices, policy delays and a slowdown in demand both at home and for exports have hurt the industrial sector. India Inc has stepped up calls for cutting interest rates to revive the industrial sector and has urged the government to accelerate reforms to remove the bottlenecks. But, experts say impending state and nationals polls would make it difficult for the government to fast-track reforms.