Thaindian News

New Delhi, May 12 (IANS) At 7.3 percent, India’s industrial output in March grew the fastest in almost five months, helped by strong manufacturing growth but economists said the rise in production levels may not be matched in the coming months.

The index of industrial production (IIP), the barometer of the output of various sectors like manufacturing, stood at 7.8 percent for the last fiscal, according to data released by the Planning Commission here.

“The March IIP numbers are considerably higher than the general expectation of around 4 percent. One reason may be the positive showing of the core infrastructure sector output which stood at 7.4 percent and the upswing in capital goods output on a month-on-month basis,” said Anis Chakravarty, director with Deloitte, Haskin & Sells.

“In addition, there may be year-end reporting and closing effects which have affected the IIP growth positively,” added Chakravarty.

IIP had grown by a slow 3.6 percent in February.

Manufacturing output, which constitutes a majority of the IIP, rose by 7.9 percent in March, while the electricity sector grew by 7.2 percent.

Mining activity rose at a slower 0.2 percent.

In terms of industries, 13 out of the seventeen 17 industry groups have shown positive growth during March as compared to the corresponding month of the previous year.

During the month under review, capital goods showed robust growth, rising by 12.9 percent, intermediate goods production rose 5.4 percent, consumer goods by 7.7 percent, consumer durables by 12.3 percent and consumer non-durables by 5.7 percent.

“Overall there are many downside risks for India’s manufacturing sector in the coming months. Improved growth in the manufacturing sector in March is more an indicator of continued volatility in the growth of the sector for the last few months”, said Rajiv Kumar, director general of FICCI.

If industrial activity continues to grow at such robust levels, it could strengthen the case for another interest rate hike by the Reserve Bank of India.

The central bank had earlier this month hiked key interest rates by 50 basis points to combat inflation, saying it did not mind sacrificing growth in the short-term, but would concentrate on bringing down inflation.

“Growth in the manufacturing sector is going to slowdown in the coming months because commercial banks have raised interest rates further which will affect investments in the sector. Also, profitability of the sector in the last quarter of 2010-11 had fallen as a result of the steep rise in prices of commodities and raw materials,” said Kumar.