India’s industrial output grew by 1.9% in March, marginally higher than the 1.7% growth recorded in February, with manufacturing growth weakening at just 0.9%, slightly better than the 0.8% recorded a month ago.
This is the fifth consecutive month that the index of industrial production (IIP) growth has been below 2%. Electricity generation and mining output grew by 6.1% and 4.5%, respectively.
On a sequential basis, however, industrial production was up 12.5% in March from February 2022 levels, according to quick estimates released by the National Statistical Office (NSO). ICRA Chief Economist Aditi Nair said output of primary and consumer goods increased month-on-month, but this was offset by a fall in expansion rates for capital, infrastructure and intermediate goods.
Consumer durables output shrank for the sixth month in a row, shrinking 3.2% in March, while consumer non-durables production fell for the third month in a row, falling 5%.
Infrastructure and construction goods registered a healthy growth of 7.3% and primary goods also registered a growth of 5.7%. However, production of capital goods and intermediate goods grew marginally by 0.7 per cent and 0.6 per cent, respectively. This is the slowest pace of capital goods growth in three months.
Madan Sabnavis, Chief Economist, Bank of Baroda, said, “The capital goods numbers are disappointing… Clearly, the investment cycle has not started yet and will be postponed again due to the war situation and uncertainty.”
He added that the steady decline in consumer durables and non-durables reflects the absence of a pick-up in consumption, and there is little hope of recovery as rising prices will push consumption further back.
CARE Ratings chief economist Rajni Sinha said, “Industrial production trend remained weak and manufacturing remained weak with the largest share of industrial growth.”
“For India’s economy to recover, it is very important to start reforming consumption expenditure, which in turn will help improve capacity utilization levels and start the private investment cycle,” he said.
Ms Nair said the outlook for the coming months is not very bright due to buoyancy in global commodity prices.
“Prolonged stress can also impact corporate profits and impact the investment climate, impacting production of capital goods and infrastructure/construction goods. Furthermore, geopolitical tensions in China as well as supply chain implications will continue to provide downside risks to production in regions dependent on key raw materials provided by Russia, Ukraine or China,” she warned.