May industrial output grows 2.7 per cent, but most sectors remain subdued

India's Index of Industrial Production (IIP) grew 2.7 per cent in May, data released by the Ministry of Statistics and Programme Implementation (MOSPI) showed.

However, the April 2015 IIP growth has been subsequently revised to 3.36 per cent, lower than the 4.1 per cent growth originally reported last month (which had beaten all expectations). The cumulative IIP growth for the period April-May this fiscal, over the corresponding period last year, stood at 3 per cent.

Barring the electricity sector, which grew 6 per cent, all other sectors remained subdued. The manufacturing sector and mining sector were the main spoilers, growing only 2.2 per cent and 2.8 per cent respectively. In sub-groups within the manufacturing sector, the basic goods segment saw a healthy growth of 6.4 per cent while capital goods was up marginally at 1.6 per cent.

On the other hand, consumer durables segment contracted a whopping 3.9 per cent from the same period last year. Out of 22 industries captured in IIP, only 12 industries showed positive growth as compared to the corresponding month of the previous year.

The upbeat core sector growth of 4.4 per cent in May had added some optimism. The combined index of eight core industries data is released by the Office of the Economic Adviser and it accounts for 38 per cent share in IIP. The analysts were also expecting the IIP to grow around 3-4 per cent.

The upturn in the Indian manufacturing sector has gathered some pace of late but its impact will show up with some time lag. The first quarter of fiscal 2015-16 started off with commissioning 300 projects with investments worth Rs 1.26 lakh crore, out of which 64 projects worth Rs 50,000 crore were commissioned in the manufacturing sector, as per data provided by CMIE.