Mining, power drive IIP growth to five-month high

NEW DELHI, Sept. 12 -- India's factory output rose to a five-month high of 5.7% in July, up from 3.7% in June, driven by strong growth in mining and power, official data released on Tuesday showed.

The Index of Industrial Production (IIP), or factory output growth, stood at 2.2% in July 2022, mainly due to a low base effect.

"The growth rates over the corresponding period of the previous year are to be interpreted considering the unusual circumstances on account of covid-19 pandemic since March 2020," said an official statement.

The IIP growth for July was driven by the mining and power sector, said Madan Sabnavis, chief economist at Bank of Baroda.

"Nine of the manufacturing industries have witnessed negative growth. This includes electronics too which is disappointing given that it is part of the PLI (production linked incentive) set up," Sabnavis said, adding that textiles exports continue to underperform due to a global slowdown.The upcoming festive season in September, October and November, will hold clues to whether the growth in industry is sustainable, which will depend on the revival of consumer goods, Sabnavis said."High inflation as well as dilution of pent-up demand will come in the way of future growth for sure," he added.

As per the IIP data released by the ministry of statistics and programme implementation, manufacturing grew by 4.6% in July compared to 3.1% in June.Similarly, electricity generation saw a growth of 8% in July compared with 2.3% a year ago.

Mining output grew 10.7% during the month against a fall of 3.3% a year ago, and the capital goods segment grew 4.6% compared with 5.1% a year ago.

During the April-July FY24 period, the growth in IIP stood at 4.8%, down from 10% in the year-ago period.

Consumer durables output fell in July by 2.7% against 2.3% growth in the year-ago period. Consumer non-durable goods output rose by 7.4 % in July compared with a 2.9% fall a year ago.

"The IIP print for July 2023, at 5.7%, exceeded our expectations, on account of a better-than-expected performance of the manufacturing sector," said Aditi Nayar, chief economist, ICRA Ltd.

"The YoY performance of most available high frequency indicators improved in August 2023 relative to July 2023, including freight and electricity generation. Based on these trends as well as a favourable base (-0.7% in August 2022), ICRA expects the YoY IIP growth to witness an uptick to about 5-7% in August 2023," Nayar added. Published by HT Digital Content Services with permission from MINT. For any query with respect to this article or any other content requirement, please contact Editor at contentservices@htlive.com