New Delhi, Jan 12 (IANS): India's industrial output rose by a better than expected 5.9 percent in November against the 5.1 percent contraction in the previous month on the back of a rebound in the manufacturing sector, raising hopes of an end to the economic slowdown.
Official data released Thursday showed the factory output, measured in terms of the Index of Industrial Production (IIP), registered a cumulative growth of 3.8 percent in the April-November period.
The manufacturing sector, which constitutes over three-fourths of the IIP index, rebounded with a 6.6 percent growth in November after a 6 percent contraction in the previous month.
Food inflation also remained negative for the second consecutive week, indicating headline inflation could come down. Food inflation was recorded at 2.9 percent for the week ended Dec 31.
"We need to build on this recovery with a stronger performance of capital goods, and therefore investments, to recover the growth momentum in the remaining months of the current financial year," said Finance Minister Pranab Mukherjee, seeing the factory output and food inflation data.
"The policy focus will have to be accordingly adjusted," he added.
Planning Commission Deputy Chairman Montek Singh Ahluwalia said the rebound in factory output growth indicated an end to the economic slowdown and would help improve business sentiment.
"The industrial growth of almost 6 percent is a good change. It hopefully indicates that the slowdown in industry will basically come to an end during the third quarter," said Ahluwalia.
Analysts said with improvement on both growth and inflation fronts, the Reserve Bank of India is unlikely to tinker with the key policy rates in its monetary policy review Jan 24.
According to data released by the ministry of statistics and programme implementation, electricity output grew 14.6 percent in the month under review as compared to 5.6 percent in the previous month.
However, the contraction continued in the mining sector. It contracted 4.4 percent in November 2011 as compared to the 7.2 percent in the previous month.
Another area of concern was capital goods which contracted by 4.6 percent in November.
Other sectors recorded positive growth. Basic goods registered a growth of 6.3 percent, intermediate goods 0.2 percent, consumer durables 11.2 percent and consumer non-durables 14.8 percent.
Industry associations, however, said policy makers need to remain cautious as fundamental trends remained weak.
"Strong growth in consumer goods in November is also based on a very low base of last year. In fact, 14.8 percent growth in consumer non-durables is on the negative base of last year. This certainly cannot be seen as the buoyancy of consumer demand in the country," said Harsh Mariwala, president of the Federation of Indian Chambers of Commerce and Industry (FICCI).
He said with easing inflationary pressure, the Reserce Bank of India (RBI) should cut rates.
"Now that the inflation is going down and industrial growth remains fragile, the RBI should reduce interest rates as soon as possible to revive investments," said Mariwala.
Chandrajit Banerjee, director general of the Confederation of Indian Industry (CII), said although the data indicated that the industrial output was not on a downward spiral, concern remained on the critical areas of capital goods and mining.
"The performance of critical sectors in the capital goods and intermediate goods groups has been poor. Without a recovery in these sectors, the investment momentum will remain subdued, without which a sustained recovery will not be possible," Banerjee said.