Industrial output shrank 0.1% in August; manufacturing output grows 1%

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India’s industrial output shrank 0.1% in August, led by contractions of 4.3% and 3.7% in mining and electricity, even as manufacturing output grew a meagre 1%. The National Statistical Office said it is likely that the decline in the growth of Mining sector is due to heavy rainfall during the month.

In terms of absolute output levels, the Index of Industrial Production (IIP) has hit a nine-month low of 145.6, marking a 2.5% drop in output from July, when the IIP had risen 4.7% as per updated data, compared to a 4.8% uptick estimated earlier.

Within manufacturing, 11 of 23 major segments recorded a decline in production compared to August 2023. Five segments recorded a double-digit growth — wearing apparel, electrical equipment, computers and electronics, wood and cork products, and furniture. However, significant base effects were responsible for these growth spikes as some of these segments had contracted sharply last year.

Motor vehicle production grew a mere 0.5%, while textiles and leather products rose by just about 2%.

Economists attributed a part of the contraction to broader base effects from August 2023, when industrial output grew 10.9%.

These base effects were also tangible in the trends for factory output categorised by end-use, with consumer non-durables and primary goods contracting 4.5% and 2.6%, respectively, on top of double-digit upticks last year.

Capital goods production rose 0.7% and infrastructure/construction goods saw a mere 1.9% uptick, vis-a-vis strong double-digit surges in August 2023.

Intermediate goods’ output rose 3%, while consumer durables clocked the strongest uptick among these six end-use segments of 5.2%, with August output recovering from a three-month low in July.

For consumer non-durables, this is the fourth straight month of contraction, and it is the only end-use segment to remain in the negative zone through the first five months of 2024-25, with cumulative production 2% below last year.

Overall industrial output has risen 4.2% between April and August this year, compared with a 6.2% growth in the same period of 2023-24, with manufacturing being the weakest link, having risen 3.6% so far this year, while electricity generation has accelerated by 7.1%.

Bank of Baroda chief economist Madan Sabnavis said growth rates may be better from September with a peak being achieved by October-end, which would be the post-harvest and festival season when spending typically increases.