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India IIP contracts 0.1% in Aug; at 22-month low

Informist, Friday, Oct. 11, 2024

NEW DELHI - India's industrial production contracted 0.1% on year in August, data released by the National Statistical Office showed today. At (-)0.1, industrial output contracted for the first time in 22 months in August, and was the lowest since October 2022.

Industrial growth, as measured by the Index of Industrial Production, in August was below the consensus estimate of 1.0%, as per an Informist poll. The fall in output was largely due to an unfavourable base effect.

Industrial growth in July, which was provisionally estimated to be 4.8%, has now been revised downwards to 4.7%. Industrial output had grown 10.9% in August last year. For Apr-Aug, India's industrial output expanded 4.2%, lower than the 6.2% recorded in the same period last year.

A fall in production in the manufacturing and electricity sectors led to a contraction in industrial output in August. Meanwhile, the manufacturing sector continued to rise, albeit slower than in July. Output of the mining sector contracted 4.3% in August, compared to a growth of 3.8% in July, while electricity production was down 3.7%, against an increase of 7.9% in July.

Output of the manufacturing sector, which accounts for more than three-fourths of the IIP, grew 1.0% in August, slower than the 4.4% in July. The manufacturing sector output had risen 10.0% in August 2023, while the output of mining and electricity sectors grew 12.3% and 15.3%, respectively.

Within the use-based classification, the biggest decline was in primary goods, which contracted 2.6% in August as compared to a rise of 5.9% in July. This was the first contraction in the production of primary goods since February 2021. Consumer non-durables was the only other use-based category the output of which fell in August at (-)4.5%.

Production of consumer durables rose the most in August at 5.2%, but was still lower than the previous month's growth of 8.3%. While the output of all the other three categories--capital goods, intermediate goods, and infrastructure goods--grew in August, but was still lower than the previous month.

"A sustained decline in consumer non-durables indicates that the stress in rural demand hasn't bottomed out yet. However, the steady growth in consumer durables is a positive for consumption demand in the economy," Paras Jasrai, senior economic analyst at India Ratings and Research, said.

Bank of Baroda Chief Economist Madan Sabnavis noted that industrial output growth rates are likely to improve from September, "with a peak being achieved by October-end which would be the post-harvest and festival season when spending typically increases."

The following tables detail year-on-year changes in industrial output in August (in %):

Source: Ministry of Statistics and Programme Implementation

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Reported by Shubham Rana

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