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India’s factory output, as measured by the Index of Industrial Production (IIP), eased to 4.2 per cent in June, the lowest level since January 2024, mainly due to a slower growth in manufacturing output.
Manufacturing, which accounts for 77.6 per cent of the weight of the IIP, slowed to a seven-month low of 2.6 per cent compared with 5 per cent in May and 3.5 per cent in June 2023.
The overall industrial output had recorded a growth of 4 per cent in June 2023 and 6.2 per cent in May this year.
Cumulatively so far in the financial year 2024-25, industrial growth has been recorded at 5.2 per cent during April-June as against 4.7 per cent in the previous financial year.
Mining output growth rose to 10.3 per cent in June from 6.6 per cent in May and 7.6 per cent in the year-ago period due to higher coal demand. As per the latest data, electricity output slowed to 8.6 per cent in June from 13.7 per cent in May but was higher than 4.2 per cent growth in the corresponding period in the previous year.
“Within manufacturing, growth was driven by electronics (after a long hiatus), electrical machinery, metals and the auto sector. There was some recovery in consumer demand for sure though aided by the base effect. Infra work, though muted due to the elections, did have a positive impact on metals and machinery…industry does appear to be on the right path and further pickup can be expected from the end of Q2 and Q3, as the festival season brings in higher demand,” Madan Sabnavis, Chief Economist, Bank of Baroda said.
As per the IIP data, 14 out of the 23 sectors in manufacturing registered growth in June, with manufacture of electrical equipment (28.4 per cent), furniture (16 per cent), and computer, electronic and optical products (10.7 per cent) were among the highest growing sectors. Other manufacturing (-12.6 per cent), tobacco products (-10.9 per cent),leather and related products (-3.9 per cent) were amongst the significant non-performers.
On the basis of use-base classification, the capital goods segment, a key indicator of the investment sentiment, showed slower growth of 2.4 per cent in June from the 2.9 per cent growth rate seen both in the previous month and the year-ago period. Consumer durables output — an indicator of consumption demand — grew 8.6 per cent mainly coming on the back of the base of (-) 6.8 per cent in June 2023. Consumer non-durable goods output, which reflects fast-moving consumer goods, was in negative territory at (-) 1.4 per cent in June over just 0.5 per cent growth last year.
“Moderating growth in the manufacturing and electricity sectors offset the acceleration in mining growth weighing on the overall industrial performance. The performance in consumption related segments remained mixed with output of consumer durables rising by 8.6 per cent while non-durables output contracted by 1.4 per cent. Broad-based consumption improvement and the revival of private investment remain crucial for industrial activity. From the consumption perspective, the trajectory of food inflation and progress of monsoon remain the key monitorable,” Rajani Sinha, Chief Economist, CareEdge Ratings said.
