India back on growth track

After months of negative growth, India’s industrial production (IIP) showed signs of revival in April, expanding by 1.4 per cent.

This shows that the stimulus packages announced by the government have started making an impact, said analysts. “The worst is over for the economy,” said the Prime Minister’s economic advisory council, head, Prof. Suresh Tendulkar.

In December, February and March the industrial production had shown contraction.

Citi said that going forward it expects industrial growth to pick up. It projected industrial production to grow by five per cent in 2009-10 against 2.6 per cent in financial year 2009. “This is due to an improvement in the investment climate, coupled with growth being the government’s top priority,” said Citi.

According to RBI, the six interest-rate cuts since mid-October and three stimulus packages are giving India a boost worth almost seven per cent of the GDP.

On a sectoral basis, the buoyancy in electricity (7.1 per cent) continued for the second month in a row. While mining was up 3.8 per cent, the sharp fall in food products (-34 per cent) resulted in manufacturing lagging at 0.7 per cent.

Citi said that going forward the trends in electricity are likely to remain strong. “With the President (Mrs Pratibha Patil) stating that 13,000 MW of power capacity would be added each year during the 11th Five-Year Plan and a greater focus on time-bound implementation, power will likely be a focal point of the government’s infrastructure thrust,” it added.

Capital goods production remained in the red for the second consecutive month, down 1.3 per cent in April against 8.4 per cent during the previous month.

Goldman Sachs said that it expects a pick up in activity in the second half of this fiscal. “Several large investment plans that were mothballed in part due to election-related uncertainties will likely be put back in place,” it said.