India’s industrial activity has witnessed a sharp V-shaped recovery, as the sector recorded “another astounding performance” in January, as one economist put it. The country’s industrial output rose 16.7 percent in January 2010 from a year earlier, stronger than market expectations, aided by stimulus measures that boosted domestic demand, data shows. For December 2009, the growth rate was 17.6 per cent, revised upward from 16.8 per cent, compared to 1 per cent during the corresponding month in 2008.
Finance Minister Pranab Mukherjee said the current trend in the Index of Industrial Production (IIP) is encouraging and would allow the economy to achieve a Gross Domestic Product (GDP) growth rate of 7.2 per cent in the current financial year. The finance minister said the annual IIP growth figure was 9.6 percent which was close to double digits. “It shows that growth is not merely government-expenditure-driven but manufacturing is also contributing.”
Given the likelihood of continued sequential growth and a markedly favorable base, analysts in the country expect IIP to stay in the range of similar high growth rates at least for the next three to four months. Growth in industrial output will stay in double digits until the end of this financial year (2009-10) and the encouraging bit is that the composition of lead indicators of the economy are now becoming more and more broad-based.
Index moves up
Meanwhile, the HSBC Markit Purchasing Managers Index (PMI), one of the most reliable indices tracking the health of the manufacturing sector, climbed to its highest level in one-and-a-half years to 57.6 in January 2010. The index had stood at 55.6 in December 2009.
“Any lingering concern that India’s manufacturing recovery was tailing off should be put off. A second consecutive rise in PMI has taken the series to a new cycle high consistent on double digit rise in industrial production,” says Robert Prior Wandesforde, Senior Asian economist, HSBC.
A recent comment by David N. Farr, chairman and chief executive officer of St. Louis-based Emerson Electric Inc., that the company would double its revenues in India by 2012, is a clear indicator of the market enthusiasm.
About the author
Uday Lal Pai, firstname.lastname@example.org, is a freelance journalist based in India.