The Indian economy is showing signs of revival. According to data released by the ministry of commerce and industry on Wednesday, output of six key infrastructure industries, which constitute 26.7% of the industrial output data, grew a healthy 2.9% in March, the highest since September 2008. The index for the six core industries posted a similar 2.9% growth in March last year and rose a revised 1.3% in February.
However, for the fiscal 2008-09, the index grew 2.7% compared to 5.9% a year ago, with the slowdown attributable to the worldwide economic slowdown.
The cement sector showed an impressive 10.1% growth in March due to increased government spending on infrastructure. Electricity generation went up 5.9% to a 13-month high and coal output grew 5.2%. However, finished carbon steel output contracted 2.6% and crude oil production contacted 2.3%, pulling down the overall growth rate of the index.
Outlook for the steel sector remains robust mainly on account of improved demand from the automobile and construction sectors. Earlier this week, the World Steel
Association, which is representing 180 steel producers across the world, estimated that India's steel consumption would grow about 2% in 2009 compared to a 14.9% decline in worldwide steel consumption. On the other hand, the decline in crude oil production was attributed to a dip in the recovery of oil from fields. India imports nearly 70% of its oil consumption.
The better-than-expected core sector numbers are likely to cushion the fall in the index of industrial production. The index contracted 1.2% in February 2009 compared to the 9.5% expansion a year ago. Fiscal and monetary measures announced by policy makers in the last few months and easing liquidity conditions may also help in a recovery. Industrial output numbers for March will be released on May 12 by the Central Statistical Organization.
Economists are of the view that a recovery might be round the corner and see better times ahead. Significant improvement in lead indicators such as foreign exchange reserves, FII flows, inventories and money supply, also suggest the likelihood of an early recovery. In the past 5-6 days, Swiss bank UBS AG, Barclays Capital and Macquarie Bank have said the Indian economy can only get better from now, and that they are looking at a mid-year recovery.
Separately, the National Council for Applied Economic Research (NCAER) said on Wednesday that the economy would grow 6.5-6.9% in 2009/10. Although external environment has deteriorated, fiscal stimulus, lower petroleum prices and revival of investment and consumption demand could boost economic growth, it said. For 2008/09, it retained its earlier forecast of 6.5% economic growth.
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