Industrial production clocks modest rebound, up 3.1%

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| Photo Credit: K. Murali Kumar

India’s industrial output returned to the positive trajectory with a moderate uptick of 3.1% in September, from its first contraction in 21 months this August, led by a 3.9% growth in manufacturing even as electricity and mining sectors grew under 1%.

The Index of Industrial Production (IIP) inched up 0.7% from August but was still the second weakest reading since last December. The mining and manufacturing indices rose mildly from August, but electricity generation fell 2.5% sequentially and was at its lowest since March.

The IIP had risen 6.4% in September 2023, so there were some base effects at work too.

Unlike August, when 11 of 23 manufacturing segments contracted, just five segments shrank in September. However, computers and electronics, one of just five segments to see double-digit growth in August, contracted 1.3%.

Industrial output has grown 4% through the first half of 2024-25, compared to a 6.2% uptick last year, with manufacturing (3.7%) and mining (4.2%) being a drag even as electricity generation grew 6.1%.

Spliced by end-use, all six segments of factory output recorded positive growth, compared to just four segments in August, led by a 6.5% spike in consumer durables that economists linked to factories stockpiling inventories to meet festive demand.

Consumer non-durables broke a four-month streak of contraction but grew just 2% in October. CareEdge Ratings chief economist Rajani Sinha said the performance of consumption-related segments warrants close monitoring amid signs of softening urban demand.

Primary goods also rebounded from a 2.6% contraction in August to rise 1.8% in September, but was marginally lower than August in absolute terms. Capital goods output growth improved to 2.8% from 0.5% in the previous month, with production rising a sharp 7.2% from August levels.

Intermediate goods’ production grew 4.2%, while infrastructure and construction goods recorded a 3.3% rise over September 2023 levels, although both these segments’ actual output was moderately lower than the preceding month.

Crisil chief economist Dharmakirti Joshi reckoned that industrial activity may rise further in coming months with the festive season consumption demand boost and an uptick in rural demand after a healthy monsoon. “However, the impact of elevated borrowing costs will weigh heavy, especially in urban areas. This is evident from slowing bank credit growth in the past four months,” he noted.