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Industrial output momentum to pick up: India Ratings


New Delhi, Oct 13 :

Ratings agency India Ratings and Research Monday said it expects the weak industrial output to regain momentum during the first quarter of 2015-16.

Last week data showed that the industrial activity, measured in terms of the Index of Industrial Production (IIP), grew marginally by 0.4 percent in August over the same month of the previous year.

The August industrial growth compared unfavourably with the 0.5 percent recorded in the previous month, the Central Statistics Office data showed.

The cumulative growth for April-August 2014-15 over the corresponding period of the previous year stands at 2.8 percent.

The agency said it expects the manufacturing sector to take-off in the festive season.

“The sector (is expected) to do well in the coming months backed by a favourable base, festive season demand and the budgetary push. Ind-Ra expects the manufacturing sector to grow at 5.3 percent in FY15,” the agency was quoted in a statement

According to the agency, the mining sector which witnessed negative growth for three consecutive years, due to a stiff coal production target and the Supreme Court lifting the ban on mining iron ore in Karnataka and Goa, witnessed a turnaround and grown each month since November 2013.

“But the cancellation of 214 coal blocks allocated since 1993 will adversely impact coal production in the near term. It is highly unlikely that the reallocation process will be complete by FY 15. In this situation Coal India is expected to take things forward but CIL itself is struggling to achieve its own coal production targets,” the agency pointed out.

“In FY 14 CIL achieved 95.96 percent of its production target and achieved just 2.3 percent growth over FY 13 production. To achieve the captive coal mines’ FY 14 coal production target, CIL will have to improve its production performance by 8.41 percent, which does not look too feasible.”

The growth across use-based sectors which includes basic and intermediate goods has been uneven, thus showing that the recovery across sectors will be a gradual and slow process.

However, the agency pointed out that electricity sector has witnessed growth in each month since April 2006.

“Although the growth pattern has been uneven over this period, the sector has done reasonably this fiscal despite the fuel linkage issues plaguing thermal, gas based power generation plants,” the agency added.