production contract of manufacturing, mining sector; Only the power generation sector to show growth; Analysts warn of impact on growth if IIP is not helped in September, October
production contract of manufacturing, mining sector; Only the power generation sector to show growth; Analysts warn of impact on growth if IIP is not helped in September, October
India’s industrial output shrank 0.8% in August, registering a marginal increase of 2.2% in the previous month, with both manufacturing and mining sectors recording lower output than a year ago, while overall factory output in July was reduced by 2.3% from 2022.
While the Index of Industrial Production (IIP) had risen 13% in August 2021, base effects only played a minor role in the contraction with the index reading 131.3, the lowest level since November 2021, when it stood at 128.
Manufacturing output declined 0.7% from August 2021 levels and was 1.48% lower than July 2022, while the mining sector dropped 3.9% from a year ago and was 0.95% below July levels.
Electricity generation was the only sector with a growth of 1.4% this August compared to a year ago and a 1.3% increase compared to July. However, the power generation index for August is the second lowest level since at least April 2022.
While there was an ‘all-round disappointment’ in the IIP print, Bank of Baroda Chief Economist Madan Sabnavis said that ‘the main drag has come from the consumer side, with both durable and non-durable production declining by 2.5% and 9.9% respectively’ .’ ,
“Inflation has certainly got in the way of demand and the important part will be how demand changes in time for the festival… Unless IIP growth reaches 5% in September and October, the growth prospects will be adversely affected,” he said. ,
While industrial output in August was up 4% above pre-Covid levels, it was below most expectations.
“It will be critical for consumption in the economy to sustain overall growth. CARE Ratings Chief Economist Rajni Sinha said, “Slowdown in global growth, sluggish exports and increased inflation are impediments to a pick-up in industrial activity.”