After witnessing a lull in business for more than a year, the Indian industrial sector can now heave a sigh of relief as the industry has begun exhibiting signs of improvement. Sending out positive signals of a recovery, the industry grew by 7.8% in June this year, bringing cheer to India Inc, including SMEs.
The annual increase in the index of industrial production (IIP) at 7.8% for June is taken as an indication of a genuine recovery, and not a result of any statistical delusion or ‘base effect’ since the growth comes on top of the 5.4% growth registered during the same month last year.
Beginning of the end noticeable
According to the data released by the Central Statistical Organisation (CSO), the Indian industry recorded a year-on-year growth of 7.8% in June, marking a 16-month high and enthusing small units in the industrial sector. The IIP figures were largely driven by the growth witnessed in the manufacturing sector, which rose 7.3% in June this year over 6.14% growth seen in the corresponding period last year.
“A 7.8% growth in IIP is way above our expectation and this recovery was led mainly by the spurt in manufacturing activities and growth in consumer durables. The tremendous rise in IIP numbers in June this year is further indicative of an economic pick-up,” said D Dasgupta, Chief Analyst at CMC in Kolkata.
Good performance in the capital goods sector has given further cause for optimism to the SME sector. After having logged 3 successive months of negative growth, the sector recorded an 11.75% rise in production over last year. By projecting all-round impressive gains, the CSO data has boosted the morale of several small-scale enterprises in the consumer durables and non-durables sectors.
“The significant jump in the performance of the capital goods sector is indicative of renewed investment activity. This is a positive sign and we hope that the trend of surge in the industrial growth continues,” said B Sen, Executive at DB Shah & Brothers, a capital goods supplier in Kolkata.
However, it is important for the industrial sector to sustain the high growth rate during the coming months. Investments in infrastructure and initiation of skill development schemes are likely to provide a major impetus to SMEs in the sector. Besides, ensuring credit availability at affordable rates will also help the small manufacturing firms to witness higher growth in IIP figures in the ensuing quarters.
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