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India’s industrial output growth moderated to 4.3% in December 2022 from 7.3% in November, despite mining and electricity production rising at around 10% for the second successive month as manufacturing growth faltered from 6.1% in November to just 2.6%.
While base effects perked up electricity and mining, which had grown at 2.8% and 2.6% respectively, a year earlier, manufacturing didn’t see such a push despite a mere 0.6% rise in December 2021. Yet, overall manufacturing levels were 4.7% higher on a sequential basis and the Manufacturing index component of the Index of Industrial Production (IIP) hitting the highest level since March 2022.
On the basis of end-use, four of six sub-sectors — primary goods, capital goods, infrastructure and construction goods, and consumer non-durables — recorded a rise in the range of 7% to 8% in December 2022, partly aided by weaker growth numbers a year ago.
However, Consumer durables output slipped into contraction again, slipping a sharp 10.4% in December 2022, from a 1.9% contraction a year ago. After three months of contraction, consumer durables had rebounded in November to grow 5.2% year-on-year. December’s output was 2.2% lower than November 2022 and marked the second worst production level in 13 months.
“The negative growth in consumer durables means that the pent-up demand seen during festival season has weaned off,” said Bank of Baroda chief economist Madan Sabnavis, noting that the consumer non-durables grew 7.2% over a low base of 0.3% in December 2021.
Intermediate goods production shrank 0.3% in December 2022 compared to a 1% growth in December 2021, but was 3.6% over November’s levels, with total output at its highest level since May 2022.
“On the whole, the infra-related industries are showing good traction while it is volatile for consumer goods… Firms have also been raising prices of their products which will come in the way of demand as will the series of interest rate hikes invoked by the Reserve Bank of India,” he said, projecting growth to remain “narrowly focussed rather than broad based” in last quarter of 2022-23.
As many as 11 of the 23 manufacturing sectors reported a contraction in December, led by computers, electronics and optical products (-37%), wearing apparel (-21.9%), tobacco (-12.1%), textiles (-11.9%) and leather products (-11.6%). On the other hand, pharmaceutical production grew at the fastest pace of 16%, followed by printing of recorded media (13.6%), motor vehicles (11.6%) and machinery and equipment manufacturing which grew 10.9%.
Aditi Nayar, chief economist at ICRA expects the IIP growth to recover to a range of 5% and 7% in January 2023, but pointed to the need to “remain watchful of the impact of a slowdown in external demand and the consequent decline in merchandise exports on the performance of the manufacturing sector”.
The National Statistical Office also revised the IIP for September 2022 to reflect an uptick of 3.3% as against a 3.5% growth estimated earlier.