ECONOMY & BUSINESS

India’s industrial growth falls to 3.7% in June

According to data unveiled by the Ministry of Statistics and Programme Implementation on August 11, India’s industrial output underwent a growth of 3.7 percent in June. This recent metric, as indicated by the Index of Industrial Production (IIP), marks a three-month low at 3.7 percent. Notably, this figure falls short of the consensus projection of 5 percent.

Comparatively, May witnessed an industrial growth of 5.2 percent, which has since been revised to 5.3 percent. In June of the previous year, the industrial growth had soared to 12.6 percent.

For the initial quarter of the fiscal year 2023-24, IIP growth registered at 4.5 percent, a considerable decline from the robust 12.9 percent noted in April-June 2022. The latter data point was boosted by a favorable base effect.

The sluggish growth observed in June’s industrial output is largely attributed to a weaker expansion in the manufacturing sector, which saw a year-on-year rise of 3.1 percent, notably slower than the 5.8 percent growth in May. Given that the manufacturing sector contributes over three-fourths of the IIP, its performance significantly impacts the headline industrial growth number.

In contrast, the mining and electricity sectors demonstrated improved performance, with mining output ascending by 7.6 percent in June, up from 6.4 percent in May. Electricity production also experienced a notable increase of 4.2 percent in June compared to a mere 0.9 percent rise in May. The enhanced performance in these sectors can be attributed to the relatively drier conditions in June, allowing for heightened mining activities.

Suman Chowdhury, Chief Economist and Head of Research at Acuité Ratings & Research, expressed disappointment in the June IIP growth, highlighting the manufacturing sector’s inability to maintain the growth trajectory observed in the previous two months.

Rajani Sinha, Chief Economist at CareEdge, pointed out the favorable performance of metal output within manufacturing, while sectors reliant on exports, such as textiles and apparel, continued to face pressure.

Regarding the classification of goods based on usage, several significant variations were evident. While primary and intermediate goods experienced robust growth rates in June (5.2 percent and 4.5 percent, respectively), consumer durables encountered a decline of 6.9 percent following an upturn in May after six months. Capital goods output grew modestly at 2.2 percent, a drop from May’s 8.1 percent, and consumer non-durables rose slightly by 1.2 percent compared to May’s substantial 8.4 percent growth. Infrastructure goods, on the other hand, demonstrated consistent growth at 11.3 percent, mirroring the figures from May.

Aditi Nayar, Chief Economist at ICRA, highlighted that most high-frequency indicators improved in July in comparison to June. This led ICRA to anticipate an upswing in IIP growth to a range of 4-6 percent for July.

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