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July industrial production beats estimates at 4.2%

The country’s industrial activity, as measured by the index of industrial production (IIP), for the month of July jumped to 4.2 percent year-on-year from 4.4 percent (revised) in the previous month.

TheNewsInternational Team

The country’s industrial activity, as measured by the index of industrial production (IIP), for the month of July jumped to 4.2 percent year-on-year from 4.4 percent (revised) in the previous month.

A CNBC-TV18 poll of economists had forecast IIP to slow down to 3.41 percent, indicating the actual number is far ahead of estimates.

The index is made up by pulling in data in two ways: use-based (basic goods, capital goods, intermediate goods and consumer goods) and sector-based (mining manufacturing and electricity).

Breaking up the numbers, manufacturing (which has 75.5 percent weightage in the index) rose 4.7 percent vs 4.6 percent month-on-month; mining (weight: 14.1 percent) rose 1.3 percent vs -0.3 percent; electricity (weight: 10.3 percent) rose 3.5 percent vs 1.3 percent.

Use-wise, basic goods rose 5.2 percent, capital goods jumped 10.6 percent, intermediate goods were up 1.5 percent while consumer goods rose 1.3 percent. (Within consumer goods, durables surged 11.4 percent while non-durables fell 4.6 percent).

“The IIP data, especially the strength in capital goods, shows investment pick-up is on the mend,” RBS Senior Economist Gaurav Kapur told CNBC-TV18. “The number (growth rate) is expect to hold around 4 percent in the coming months.”

But Shubhda Rao, Chief Economist at Yes Bank, said that the country would need IIP growth of at least 5-6 percent to show that the economic recovery is in full steam.

“Government spending has to pick up,” she said.

Kapur said he expects full-year GDP to come in closer to 7.4 percent.

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