India Industrial Sector Surprises with Return to Growth

India Industrial Sector Surprises with Return to Growth

While overall production increase 2.6%, manufacturing increase 3%.

NEW DELHI -- Snapping two months of contraction that underlined plummeting output in Asia's third-largest economy .

Indian industrial production grew a surprise 2.6% in July on an annual basis, official data showed Thursday, snapping two months of contraction that underlined plummeting output in Asia's third-largest economy.

The preliminary monthly figures were the strongest since March, but still a far cry from the double-digits enjoyed for large parts of the last decade when the South Asian giant was booming.

India's economy has slowed dramatically, expanding just 5% last year in its weakest annual growth in a decade, with the rupee at near record lows against the dollar.

Manufacturing output in July increased by 3% compared with the same month last year, production of capital goods rose 15.6%, while the troubled mining sector posted another 2.3% contraction.

Analysts had forecast another decline and some of them downplayed Thursday's better-than-expected data.

"Investment is yet to recover. I would not read too much into these numbers unless we see a slightly sustained trend in recovery," said Dharmakirti Joshi, chief economist with credit rating agency Crisil.

Sonal Varma, India economist with Nomura Securities, said that economic growth was still weak, "so the sharp jump in capital goods growth appears a bit odd."

The industrial output figure for June was revised to show a contraction of 1.8% instead of a 2.2% decline initially reported last month.

Copyright Agence France-Presse, 2013

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