Index of eight core industries, which captures production in basic industries, rose in May after slipping to its lowest in a decade in April.
The index rose for the first time in six months to 4.4 per cent in May over the year-ago period after declining (-) 0.4 per cent in April, official government data show.
The cumulative growth for the first two months of fiscal eased to 2.1 per cent compared with 4.7 per cent in April-May 2014.
The eight core industries, which are a lead indicator for industrial production comprising nearly 38 per cent of the weight of items included in the Index of Industrial Production (IIP), had recorded a growth of 6.7 per cent in November last year. While the index started the year at a disappointing note, data for May provide some relief for the government.
All but one of the eight core sectors registered an increase. Of the eight sectors—coal, natural gas, petroleum refinery, fertilizers, steel, cement, electricity and crude oil—natural gas slumped by 3.1 per cent while refinery products, which accounts for 5.94 per cent weight in the core industries, increased 7.9 per cent.
Electricity generation, which has the highest weight of 10.32 per cent, increased by 5.5 per cent after declining by 1.1 per cent in April. Steel industry, which has the second highest weight, expanded by 2.6 per cent after a 0.6 per cent expansion last month.
Though the coal sector registered an increase, the growth at 7.8 per cent over the year-ago period was a notch lower compared with last month.
While the industrial sector seems to be somewhat improving, the rural economy has remained fragile. Moody's in a report published on Tuesday stated that India's weakened rural economy will remain subdued through the fiscal year ending March 31, 2016 (FY16), particularly if the risk of below-average monsoon rainfall materialises while also highlighting that the soft rural demand may prove credit negative for issuers.
"The considerable improvement in the core sector growth would support a pickup in the pace of industrial expansion in May 2015, although the extent of the same would be tempered by factors such as an adverse base effect, contraction of non-oil merchandise exports and automobile production trends," said Aditi Nayar, senior economist at ICRA.
The government will release IIP figures for May on July 10, 2015.