IIP to Pick up in Coming Months on Back of Reforms: India Inc

Notwithstanding the industrial production slowing down to 2.7 per cent in May, India Inc today said the growth will pick up in the coming months as it expects reforms initiated by the Modi government to yield results.

Also read: How is IIP calculated in India?

IIP to Pick up in Coming Months on Back of Reforms: India Inc

However, industry bodies expressed concern over the performance of the consumer goods sector, saying it signals a decline in purchasing power, particularly in rural areas.

"Going forward, we hope that growth would pick up in the subsequent months as the impact of reforms taken during the year would be felt on the ground resulting in some improvement in investment intentions and a turnaround in demand," CII Director General Chandrajit Banerjee said.

Terming the industrial growth of 2.7 per cent in May as "below potential", CII said it believes industrial growth is on the path of recovery as is evident by strong core sector growth in May, the fastest in six months, as many of the stalled projects have started to move.

"Measures taken up in the last few months to expedite the project clearances and also in the area of ease of doing business have started yielding results and we are hopeful that growth will accelerate in coming months," it said.

"Manufacturing sector growth seems to be picking up though it remains sluggish. With capital goods sector registering positive growth it indicates turnaround in investments in economy," Ficci President Jyotsna Suri said.

Industrial production in May slowed to 2.7 per cent from 5.6 per cent a year ago, dragged down by manufacturing, strengthening the case for an RBI rate cut.

The Index of Industrial Production (IIP) for April too has been revised downwards to 3.36 per cent from the earlier estimate of 4.1 per cent. Output in the consumer goods, consumer durables and consumer non-durables segments shrank 1.6 per cent, 3.9 and 0.1 per cent, respectively.

"Negative consumer demand growth is an area of concern and we hope that Government would bring out specific measures to stimulate demand in the economy," Suri noted.

"We are hopeful that better monsoons than expected would help rural demand and would create an improved environment for revival of the consumer goods sector," Banerjee said.

According to the data released this evening, a sharp deceleration in output was witnessed in the manufacturing sector though there was some pick-up in mining activity.

Growth in power generation too saw a marginal slowdown at 6 per cent from 6.7 per cent in May of the last fiscal. The growth in manufacturing was 2.2 per cent in May compared with 5.9 per cent in the corresponding month of the last year.

The mining sector expanded 2.8 per cent compared with 2.5 per cent in May 2014. Manufacturing constitutes over 75 per cent of the index.


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