2 per cent rise in industrial output not enough: India Inc

India Inc on Tuesday said a 2 per cent rise in industrial output in September was not enough to conclude that recovery is on the cards as manufacturing growth would remain subdued in coming months.

"The modest increase in IIP for the month of September is not reason enough for us to conclude that industry has turned the corner and is on a path to recovery," said Chandrajit Banerjee, director general of the Confederation of Indian Industry (CII).

Industrial production showed signs of recovery as the output grew by 2 per cent in September, mainly on account of better performance by power and mining sectors. (Read more)

"Pace of industrial activity in September belied market expectations as it rose by a less than anticipated 2 per cent. It is worrisome that the activity in the manufacturing sector has remained subdued for almost 2 years now," Assocham president Rana Kapoor said.

The manufacturing sector, which constitutes over 75 per cent of the index, grew by a meagre 0.6 per cent in September as against a decline of 1.6 per cent a year ago.

During April-September, the sector's output remained almost flat as it grew by just 0.1 per cent compared to a decline of 0.3 per cent in same period last year.

"Positive growth in manufacturing has shown revival. However, we expect the growth in manufacturing to be subdued in the coming months as a result of the current slowdown in domestic demand and lack of investor optimism given the usual uncertainty that builds around elections," Ficci president Naina Lal Kidwai said.

The data further revealed that consumer durables segment contracted by 10.8 per cent in September as against a decline of 1.5 per cent in the same month last year.

"The performance of consumer goods - particularly that of consumer durables, continues to be a cause for concern as it indicates very poor demand," Mr Banerjee said.

Overall the consumer goods grew by just 0.6 per cent in September this year compared to flat output in the same month last year.

"Negative growth in capital goods indicates that investment cycle is still in the fragile territory which needs

to revive with reduced costs of funds by rate cut and reduced costs of doing business by improving regulatory environment," said Suman Jyoti Khaitan, president of the PHD Chamber of Commerce.

As per the data, output of capital goods, a barometer of demand, showed a decline of 6.8 per cent in the month as against a contraction of 13.3 per cent in September 2012.

Power generation showed a healthy growth of 12.9 per cent in the month under review. Expansion in power generation was 5.9 per cent in April-September as compared to 4.6 per cent in the same period of the last year.  

"The robust performance of the electricity sector, evident this month would have to be sustained with the mining sector improving its performance," Mr Banerjee said.

The mining sector, with a weight of about 14 per cent in IIP, grew by 3.3 per cent in September as against 2.2 per cent in the same month last fiscal year (FY13).