India’s industrial output grew by 3.7 percent in June, as per the data released by the Ministry of Statistics and Programme Implementation on 11 August. The Index of Industrial Production’s (IIP) most recent index of industrial growth, at 3.7 percent, is at a three-month low. Additionally, it is less than the 5 per cent consensus forecast.
Industrial growth was estimated to be 5.2 per cent in May but has since been revised to 5.3 per cent. In June, it was 12.6 per cent.
IIP growth was 4.5 per cent in the first quarter of 2023–2024, down from 12.9 per cent in April–June 2022, when the data was enhanced by a positive base effect. A smaller increase in manufacturing production, which increased by 3.1 per cent vs 5.8 percent in May, held down industrial growth in June.
Since the manufacturing sector makes up more than three-fourths of the IIP, its performance has a disproportionate impact on the headline industrial growth number.
While manufacturing output grew at a slower pace, that of mining and electricity rose at a faster clip. In June, mining output rose by 7.6 percent, up from 6.4 percent in May, and electricity production was up 4.2 percent. In May, electricity production was up a mere 0.9 percent. The improved performance of mining and electricity sectors was down to the low rainfall in June as drier conditions allowed increased mining activity.
According to Suman Chowdhury, Chief Economist, and Head- Research, Acuité Ratings & Research, “IIP growth print in June-23 has disappointed at 3.7 per cent YoY and lower than the market estimates. Clearly, the manufacturing sector has not been able to sustain the growth trend that had been seen in the first two months of the last quarter. The manufacturing output grew only by 3.1 per cent YoY and actually saw a sequential contraction of almost 1.0%. While mining and power have seen better-annualised growth rates compared to Apr-May, their weightage in the overall IIP is only 22 per cent Nevertheless, on a quarterly basis, the IIP growth in Q1FY24 is 4.5 per cent which is 1 per cent higher than the average of the first quarter IIP growth in the last ten years excluding the last 3 yrs which had some anomaly due to Covid.”
He added, “In terms of use-based categorisation, the strong output growth of 11.3 per cent YoY in infrastructure and construction goods is a reinforcement of the continuing momentum in public capital expenditure. Consumer non-durables output growth slowed to 1.2 per cent YoY, while durables continued to see a bigger challenge with a contraction of 6.9 per cent in output.”
