But corporate spending is still tepid and federal revenues remain stressed, raising the risk of another false dawn for Asia's third largest economy as it tries to recover momentum. Annual growth in capital goods production, a proxy for capital investments, hit a 14-month high of 22 percent in August, government data showed on Monday. That helped overall industrial output expand at its fastest pace in almost three years.
While the figures, notoriously volatile and lumpy, were inflated by a favourable statistical base, the annual pace of expansion in the sector, measured on a three-month moving average, was 10.1 percent in August versus 3.8 percent a month ago.
Encouragingly, the recovery also appears to be becoming broad-based. “It's a very positive sign," said a senior official at the Finance Ministry, who asked not to be identified because he was not authorised to speak to the media. "It shows the strategy is showing results."
Weak capital investment has been a key factor behind India's struggle to realise its growth potential. Statistically, the economy matched China's growth in the June quarter, but very few analysts think it is growing full steam. With factories running nearly 30 percent below capacity, private companies are in little rush to make fresh investments.

At the risk of inviting the wrath of investors and ratings agencies, PM Modi's administration loosened fiscal deficit targets in this year's budget to double spending on roads and bridges.

Since April, public capital spending has clocked healthy growth of nearly 19 percent on the year, compared with a fall of 1.4 percent in the corresponding period last year.

Latest News  from Business News Desk