Growth in factory output, or index for industrial production, recovered to a 2 month high of 5.2% in January, from 4.7% in December, on the back of a lower base and double-digit growth in the electricity output, the Index of Industrial Production (IIP) data released by the National Statistical Office (NSO) on 10th March showed.
The growth in electricity output accelerated to 12.7%, whereas manufacturing also recovered to 3.7%. The expansion in mining output, however, decelerated to 8.8% from 9.8% last month.
In the first 10 months of FY23 (April-January), IIP grew 5.4% against 13.7% during the year-ago period.
Ten of 23 manufacturing sectors in the IIP, such as tobacco, textiles, apparel, leather, wood, metals, computers, transport, furniture, and other manufacturing sectors, registered contraction during January.
Rajani Sinha, chief economist, CARE Ratings, said export-intensive items such as textiles, leather and apparels continued to witness contraction in output, whereas expansion in the consumer non-durable goods output for the 3rd consecutive month is a positive development.
“Resilient urban demand, easing commodity prices and improvement in rural demand are tailwinds for industrial output.
Madan Sabnavis, chief economist at Bank of Baroda, said the manufacturing growth has been on the lower side, despite a low base last year, mainly because the production-linked incentive (PLI) scheme gains haven’t accrued to the export-intensive sectors such as textiles and electronics.
“Growth was pushed down mainly by textiles and electronics, with the former being affected by rising costs and declining exports due to global slowdown. Computers/electronics group witnessed a 29.6% fall this month. The sector was to benefit the most from the PLI scheme. Given that growth has declined 3% for 10 months, it does look like the gains have not yet accrued,” he added.
Infrastructure goods and capital goods grew at a robust 8.1% and 10.95%, respectively.
Aditi Nayar, chief economist, ICRA, said growth in January was largely in line with the growth prospects with a healthy performance of primary, capital and infra goods and consumer non-durables, thus, offsetting the marginal rise in intermediate goods and discouraging contraction in consumer durables.
“The IIP data comes in the wake of the quarterly estimates of gross domestic product (GDP) for the Q3, FY23, released by the Ministry of Statistics and Programme Implementation (MoSPI), earlier last week. The data showed that the economy grew 4.4% in the 3rd quarter as manufacturing output contracted for the 2nd consecutive quarter, and consumer demand slowed. However, the estimates are still hopeful that India’s gross domestic product (GDP) would grow at 7% in FY23.
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