RTTNews - At a time when the weak monsoon is threatening to reduce farm output, India's Index of Industrial Production, or IIP, rose much faster than expected in June from last year, mainly driven by stimulus packages, and easy monetary policy, coupled with higher demand for consumer goods and increased mining activity.

As per the data released Wednesday by Central Statistical Organization of the Ministry of Statistics and Programme Implementation, the IIP for June had a growth rate of 7.8%, much higher than the 5.4% for the corresponding month last year and the revised growth rate for May.

The cumulative growth for the period April-June 2009 stood at 3.7%, down from 5.3% for the corresponding period last year.

The ministry also lowered the estimated growth for May to 2.2% from the earlier 2.7%.

During June, the growth rate of the manufacturing sector, with a weightage of 79.4%, rose to 7.3% from 6.1% in June of the preceding year, while the power sector grew significantly by 8.0%, compared with 2.6% for the corresponding month last year. The growth rate of the mining sector too showed a robust growth of 15.4%, compared to 0.1% in June last year.

Of industries, 12 out of the 17 industry groups showed a positive growth in June, compared to the corresponding month of the preceding year. The industry groups consisting of 'Other Manufacturing Industries' showed the highest growth of 32.4%, followed by 26.3% in 'Wood and Wood Products; Furniture and Fixtures' and 13.2% in 'Paper & Paper Products, and Printing, Publishing & Allied Industries'.

On the other hand, the industry group Jute and Other Vegetable Fibre Textiles (except 'cotton') showed a negative growth of 31.1%, followed by 8.5% in 'Metal Products and Parts, except Machinery and Equipment', and 4.1% in 'Beverages, Tobacco and Related Products'.

As per the use-based classification of the IIP, the capital goods sector grew in June at 11.8%, compared to 7.8% in June last year.

The IIP stated that during June, the growth rate of basic goods rose to 10.1%, from 2.2% in the corresponding month of the preceding year. Intermediate goods grew considerably by 7.9%, compared to 2.8% for the same month last June.

In this June, the growth rate of the consumer durables sector significantly increased to 15.5% from 4.6% in June of the preceding year. But, the growth rate of non-durables plunged to 0.3% from 11.6% for the same month last year. As a result, the growth rate of overall consumer goods fell drastically to 4% from 9.9% last June.

Along with the Quick Estimates of IIP for June, the indices for May underwent the first revision, while those for March had the second and final revision, in the light of the updated data received from source agencies.

During June, the growth rate in six core-infrastructure industries, having a combined weight of 26.7% in the IIP, was 6.5%, compared to 5.1% in June 2008, on the back of robust performance by cement and steel.

Commenting on the recovery of the industrial sector, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: I always expect the positive trend (in industrial growth) to continue. However, weak monsoon could have some negative impact on the overall GDP.

Mridul Saggar, Chief Economist, Kotak Securities, said: The big jump in the output has, however, raised questions whether it can be sustained. It is definitely a very positive number. But we need to watch out if growth of this order can be sustained. The number on the manufacturing front is a big surprise.

Anand Rathi of Financial Services, Mumbai: The number far exceeds expectations, partly due to a depressed base in June last year, but all the numbers are looking very good so it seems like the stimulus measures are boosting industrial production. This is especially credible, as the external environment and thereby India's export demand remains extremely subdued. Going forward, we see industrial growth picking up pace but for the current fiscal year as a whole, our target is that industrial production growth will be around 5.5% and current trends are in line with this forecast.

India's manufacturing activity held steady in July, expanding for the fourth consecutive month, a survey by Markit Economics showed. But erratic monsoon rains could cloud demand in the economy.

With just over 40% of India's agricultural land irrigated, farm output is heavily dependent on rains but a below-normal monsoon could potentially hurt rural demand, which accounts for more than half of India's domestic consumption.

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