Industrial output grew 4.2 percent in July against a marginal rise of 0.9 percent in the corresponding month of last year. This is the second successive month of over 4 percent growth during the current financial year. The manufacturing sector, which grew 4.7 percent y-o-y from a contraction of 0.3 percent in July 2014, played a key role in this upswing. This data set reveals some strong green shoots for the economy, and I hope that the coming months would bring more reasons to cheer about for the Indian industry.

First of all, it is encouraging to see that the manufacturing sector, which constitutes over 75 percent of the IIP index, is slowly emerging as a leader of industrial growth. The sector, after posting 5.38 percent growth in June, grew 4.7 percent in July, with 12 out of the 22 of its sub-sectors showing positive growth. For the April-July period growth stood at 4 percent as compared to 2.8 percent in 2014-15. Compared to this, overall industrial output growth for this four-month period was slower at 3.5 percent. These figures give us a healthy picture of the sector, and we can expect this momentum to continue on the back of the upcoming festive season.

Another encouraging indicator in the IIP data is robustness of the capital goods sector, which is a key indicator of domestic demand. In June, this sector had witnessed the first contraction after seven months, but it bounced back in July, registering a 10.6 percent growth. A low base effect played its part in this outcome, but the figures definitely reflect the positive effects of government spending push. On the other hand, consumer durables, like last month, recorded a double-digit growth of 11.4 percent, suggesting strong consumer sentiment and likelihood of job growth.

Meanwhile, in another positive development WPI inflation plunged to a historic low of (-)4.95 percent and CPI inflation fell marginally to 3.66 percent in August, and I think this deflationary trend, along with the aforesaid positive economic indicators, offers a potential opportunity to the government to take growth to a higher level. At the same time, while the domestic economy seems to be recovering, I see little chances of recovery in our external demand in the near future. Our exports are struggling for a long time and the government should make no further delay in lending a helping hand to the sector.

I invite your opinions.