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Economy on recovery mode?

New Delhi, Sep 13 () : Economy shows signs of recovery in the Q2 of this fiscal with the industrial production in July growing at 2.6 %, a four-month high and inflation based consumer price index for August coming down from 9.64% to 9.52%.

The data released yesterday shows that the Government hopes for economy taking a turnaround in Q2 that seems to be on the right track with capital goods sector growth in manufacturing electrical equipment up by 1.6%.

Past two months, manufacturing sector went into a decline as there were no new orders and GDP dipped to 4.4% in Q1, a four-year low. Mining sector continued to be on the decline as it was for the past ten months and in July, it declined by 2.3% as per the IIP (Index Industrial Production) data.

A four times increase of 3% in manufacturing sector this July compared to no-growth for the same period last year is a sign of revival of the economy. A 5.2 % increase in power generation added to the growth in manufacturing.

In June, there was hardly any increase in power generation. The July figures brought down the April-July contraction to 0.2% of last year compared to 1.1% of the decline in IIP of Q1 this fiscal.

Economists are however not yet willing to say that the economy has made a recovery. The reason being the IIP of July was up due to capital goods sector which recorded 15.6% growth and last year for same period it was down by 5.8%. This sector is unreliable and very volatile.

June 2011, it recorded a 38.7%. The IIP grew on strength of electrical equipment and intermediate goods which increased from 0.1% of July 2012 to 2.4% this year,which alone is not enough as other sectors do not show any great recovery.

A decline of 9.3% in sales of consumer goods was seen in July this year that was in contrast to 0.8% growth of July 2012. Non-durable sales which showed 0.6% in July last year rose this year to 6.8%. However, the Q3 will change as the festive season began in Kerala with consumer goods selling more than the national average and from October, festive seasons in other parts of India would start.