Photo used for representation purpose only.
| Photo Credit: The Hindu

India’s industrial production growth accelerated to 5.2% in November this year, mainly due to good show by manufacturing sector, according to official data released on Friday (January 10, 2025).

The factory output, measured in terms of the Index of Industrial Production (IIP), witnessed a growth of 2.5% in November 2023.

India’s Index of Industrial Production increased by 5.2% in November 2024, an official statement said.

The data released by the National Statistical Office (NSO) showed that the manufacturing sector’s output grew 5.8% in November 2024, up from 1.3% in the year-ago month.

Mining production rose 1.9%t and power output increased 4.4% in November 2024.

In the April-November period, the IIP grew 4.1%, down from 6.5% in the year-ago period.

Photo used for representation purpose only. File
| Photo Credit: Sushil Kumar Verma

India’s retail inflation shot back to a nine-month high of 5.5% in September, from 3.65% in August, thanks to a resurgence in food price rise to 9.24% after two months under the 6% mark.

For rural consumers, inflation neared the 6% mark at 5.87% while their urban counterparts faced a price rise of 5.05%. Rural India, however, faced a relatively milder food inflation of 9.1% compared with a 9.6% rise faced by urban consumers.

“It is likely that the increase in inflation rate for the month of September, 2024 is due to high base effect and weather conditions,” the National Statistical Office said, adding that a “significant decline in inflation is observed in Pulses and products, Spices, Meat & fish and Sugar & confectionery”.

On a sequential basis, the Consumer Price Index (CPI) was up 0.62%, while the Consumer Food Price Index was up 1.2% from August levels, with urban India seeing a sharper month-of-month uptick of 1.35% in food bills.

Vegetables inflation surged from 10.7% in August to 36% in September, while fruit price rise gained momentum to hit 7.65% from 6.5% a month earlier. Pulses prices rose 9.81%, retreating from a 10%-plus inflation pace for the first time in 16 months. Cereals and eggs inflation eased marginally to 6.8% and 6.3%, respectively.

Beyond food, households saw a sharp uptick of 9% in prices for personal care and effects in September. Prices for this category had risen 8.4% in July and eased a tad to 7.9% in August.

Photo used for representation purpose only.

India’s industrial output growth slumped to a five-month low of 4.2% in June, with manufacturing output growth halving to 2.6% from the previous month, and electricity generation easing 2.8% from May’s record high in the face of an abating heat wave.

On the basis of end-use, production growth fell in all six segments compared to May, with consumer non-durables’ output shrinking 1.4% from last June, marking the second such contraction in three months.

The National Statistical Office also upgraded May’s Index of Industrial Production (IIP) to 6.2%, the highest in seven months, from its initial estimate of 5.9%.

Mining was the only segment to clock an acceleration in growth in June, with output rising 10.3% year-on-year, from 6.6% in May. However, actual production levels were 1.2% lower than May.

Within manufacturing, which accounts for nearly 78% of the IIP, nine out of 23 segments reported a contraction this June, including beverages, textiles, leather products and pharmaceuticals. Three sectors reported a double-digit rise in production — electrical equipment (28.4%), furniture (16%) and computers and electronics (10.7%).

Photo used for representation purpose only.

India’s industrial output growth slowed to 4.9% in March from 5.6% in February, as per the National Statistical Office, with base effects from last March boosting the uptick as output had tanked 1.9% last year.

Mining output slid to a 19-month low growth of 1.2%, while electricity generation rose 8.6% from a 1.6% contraction in March 2023.

Manufacturing, which constitutes 77.6% of the Index of Industrial Production (IIP), grew at a five-month high pace of 5.2% in March, relative to a mild 1.5% uptick in the same month last year. Manufacturing growth for February was revised downwards to 4.9% from 5% estimated earlier.

Electricity generation rose 8.6% in march 2024 from a 1.6% contraction in March 2023. File
| Photo Credit: The Hindu

India’s industrial output growth slowed to 4.9% in March from 5.6% in February, as per the National Statistical Office, with base effects from last March when output had tanked 1.9%, boosting the uptick. Mining output slid to a 19-month low growth of 1.2%, while electricity generation rose 8.6% from a 1.6% contraction in March 2023.

Manufacturing, which constitutes 77.6% of the Index of Industrial Production (IIP), grew at a five-month high pace of 5.2% in March, relative to a mild 1.5% uptick in the same month last year. Manufacturing growth for February was revised downwards to 4.9% from 5% estimated earlier, along with the month’s IIP growth which was downgraded from 5.7%.

Overall industrial output grew 5.8% in 2023-24, a tad higher than the 5.2% rise in the previous year, with manufacturing output growing 5.5% compared with 4.7% in 2022-23 and mining output accelerating by 7.5% last year from a 5.8% rise in the preceding year. Electricity generation grew 7.1% in 2023-24, easing from an 8.9% surge in the previous year.

Seven of 23 major manufacturing segments recorded a contraction in March, but as many as ten segments reported a drop in output through 2023-24, including wearing apparel (-14.2%), computers and electronics (-11.4%), furniture (-6.9%), wood products (-5.9%), chemicals (-1.7%) and leather (-1.1%).

Consumer goods remained the weakest performers through last year, despite beneficial base effects. Consumer durables grew the weakest at 3.6% compared with a meagre 0.6% rise in 2022-23, while non-durables rose 4% vis-à-vis a 0.7% uptick in the previous year.

In March, consumer durables output recorded the sharpest surge for the second month in a row, rising 9.5%, albeit over an 8% contraction in March 2023. In February, they had grown 12.3% relative to a 4.1% contraction a year ago. Consumer non-durables broke a two-month streak of contraction to rise 4.9%, but again over a weak base from March 2023, when they shrank 1.9%.

“The consumption scenario remained mixed last year with urban demand showing resilience while rural demand continued to lag,” said Rajani Sinha, CareEdge Ratings’ chief economist. While hopes of a good monsoon, moderating inflation, and pick-up in rural demand are positives, a broad-based and durable improvement in consumption remains the key monitorable this year, she stressed.

Infrastructure and construction goods continued to record healthy growth at 6.9% in March, while capital goods growth picked up to 6.1% from just 1.2% in February. Intermediate goods and primary goods rose 5.1% and 2.5%, respectively.

Over the full year gone by, Infrastructure and Construction goods recorded the strongest growth of 9.6% over an 8.4% rise in 2022-23, followed by capital goods which grew 6.2% compared with a 13.1% rise in the previous year. Primary and intermediate goods grew 6% and 5.2%, respectively.

Although a majority of high-frequency indicators have seen an uptick in April over March trends, ICRA chief economist Aditi Nayar said she expects industrial output growth to slow to around 3% to 4% in April owing to base effects as the same month had seen a 4.6% uptick in 2023.

In absolute terms, the industrial output index was up 8.22% from February with a sequential rise in output recorded in Manufacturing, Mining and Electricity, as well as the six end-use-based classifications of factory output.

As per the latest All India Household Consumption Expenditure Survey, the average monthly per capita consumption expenditure in Indian households rose by 33.5% since 2011-12 in urban households to ₹3,510, with rural India’s MPCE seeing a 40.42% increase over the same period to hit ₹2,008. File
| Photo Credit: The Hindu

For the first time in about 11 years, the government on February 24 released the broad findings of the All India Household Consumption Expenditure Survey carried out between August 2022 and July 2023. The data will play a key role in reviewing critical economic indicators, including the Gross Domestic Product (GDP), poverty levels, and the Consumer Price Inflation (CPI).

The Household Consumption Expenditure Survey (HCES) is usually conducted by the National Statistical Office (NSO) every five years, but the findings of the last Survey, conducted in 2017-18 soon after the demonetisation of high-value currency notes and the implementation of the Goods and Services Tax (GST), were never released after the government cited “data quality” issues.

As per the latest Survey, the average monthly per capita consumption expenditure (MPCE) in Indian households rose by 33.5% since 2011-12 in urban households to ₹3,510, with rural India’s MPCE seeing a 40.42% increase over the same period to hit ₹2,008.

Importantly, the numbers show that the proportion of spending on food has dropped to 46.4% for rural households from 52.9% in 2011-12, while their urban peers spent just 39.2% of their overall monthly outgoes on food compared with 42.6% incurred 11 years earlier. This reduction could translate into a lower weightage for food prices in the country’s retail inflation calculations.

The MPCE numbers cited above do not take into account the imputed values of items received free of cost by individuals through various social welfare programmes such as the PM Garib Kalyan Ann Yojana (PMGKAY) or State-run schemes, which were calculated separately, while including a few non-food items received through such schemes, including computers, mobile phones, bicycles, and clothing.

The average MPCE, at 2011-12 prices, was a tad higher when these items were included while excluding free education and healthcare sops — at ₹2,054 for rural households, and ₹3,544 for urban homes.

The Statistics and Programme Implementation Ministry released a factsheet on the summary of the Survey findings, and said a detailed report on the survey will be brought out subsequently. The estimates of the MPCE are based on data collected from 2,61,746 households, of which 1,55,014 were in rural areas, spread over all States and Union Territories, the Ministry said.

“The bottom 5% of India’s rural population, ranked by MPCE, has an average MPCE of ₹1,373 while it is ₹2,001 for the same category of population in the urban areas. The top 5% of India’s rural and urban population, ranked by MPCE, has an average MPCE of ₹10,501 and ₹20,824, respectively,” according to the factsheet.

Among the States, the MPCE is the highest in Sikkim for both rural (₹7,731) and urban areas (₹12,105). It is the lowest in Chhattisgarh, where it was ₹2,466 for rural households and ₹4,483 for urban household members.

Reserve Bank of India Governor Shaktikanta Das.
| Photo Credit: PTI

The Reserve Bank of India (RBI) on February 8 projected GDP growth for the next financial year at 7% on the back of improved household consumption and upturn in private capex cycle.

The real GDP growth is, however, lower than 7.3% estimated by the National Statistical Office (NSO) for the current 2023-24 fiscal aided by strong domestic economic activity and investments. The Indian economy grew 7.2% in 2022-23 fiscal.

In its Monetary Policy Statement, 2023-24, RBI Governor Shaktikanta Das said the recovery in rabi sowing, sustained profitability in manufacturing and underlying resilience of services should support economic activity in 2024-25.

“Among the key drivers on the demand side, household consumption is expected to improve, while prospects of fixed investment remain bright owing to upturn in the private capex cycle, improved business sentiments, healthy balance sheets of banks and corporates; and government’s continued thrust on capital expenditure,” Mr. Das said.

The improving outlook for global trade and rising integration in the global supply chain will support net external demand. The RBI flagged headwinds from geopolitical tensions, volatility in international financial markets and geo-economic fragmentation as risks to growth outlook.

“Taking all these factors into consideration, real GDP growth for 2024-25 is projected at 7% with Q1 (April-June) at 7.2%; Q2 at 6.8%; Q3 at 7% and Q4 at 6.9%. The risks are evenly balanced,” Mr. Das said.

To keep inflation within the targeted 4% (+/-2%) band, the RBI on February 8 retained benchmark interest rate or repo at 6.5%.

The interest rate setting monetary policy committee (MPC) also decided to remain focussed on withdrawal of accommodation to ensure that inflation progressively aligns to the target, while supporting growth.

“Global growth is likely to remain steady in 2024 after a surprisingly resilient performance in a turbulent year gone by. Inflation is edging down from multi-decade highs, with intermittent upticks,” Mr. Das said.

Mr. Das said rural demand in India continues to gather pace, urban consumption remains strong and investment cycle is gaining steam on the back of increased capex. Also, there are signs of revival in private investments.

‘The FY25 interim Budget carries forward the ethos of public capex a notch higher, thereby bolstering the government’s commitment to high quality spending’
| Photo Credit: REUTERS

India’s economic recovery in the early post COVID-19 pandemic phase was distinctly underscored by a strong performance in exports and domestic investments. While exports benefitted from an easing of global supply chains and a structural pick-up in services exports, domestic investments are a manifestation of the government’s relentless capex push.

The prioritisation of capex continues

As such, India’s investment ratio is estimated by the National Statistical Office to have improved to 29.8% of GDP in the financial year 2023-24 from its recent low of 27.3% in 2020-21. With this, India stands out as the fourth best country (followed by Mexico, Italy, and South Africa) in the G-20 space with respect to an improvement seen in the investment ratio, three years after COVID-19.

The FY25 Interim Budget carries forward the ethos of public capex a notch higher, thereby bolstering the government’s commitment to high quality spending. The budgeted capex by the central government, an important metric for capacity creation in the economy, is slated to touch a record high of ₹11.11 trillion in FY25. As a ratio to GDP, this would tantamount to 3.4% of GDP, the highest in the last two decades. As a share of total expenditure, this comes to 23.3%, the highest in 32 years

Out of the budgeted capex outlay of ₹11.11 trillion, nearly two-thirds is earmarked for economic services (the lion’s share of approximately 46% is accounted for by hard infrastructure sectors such as roads and railways. In case of the railways, the Finance Minister has announced the identification of three major economic rail corridors under the PM Gati Shakti programme to improve logistics efficiency and reduce cost; energy, mineral and cement corridors; port connectivity corridors; high traffic density corridors, and 40,000 normal rail bogies will be upgraded to meet Vande Bharat standards

Defence capex, a niche priority segment under the Atmanirbhar Bharat campaign, will see a record high allocation of ₹1.72 trillion (although it is budgeted to remain unchanged at 0.5% as a ratio to GDP between FY24 and FY25). This will be supplemented with the launch of a new scheme for strengthening deep-tech technologies for defence purposes and expediting ‘atmanirbharta’.

Loans and advances (form of capital transfers) is budgeted to jump to ₹1.71 trillion in FY25, implying a 20% annualised growth. This will enable States to continue marching in lock step on capex creation at the ground level. After all, States play an equally important role in the creation of regional infrastructure — on an annualised trailing basis, States had a share of approximately 44% (as of December 23) in general government capex.

A tango with the capex push

While the focus on hard infrastructure is easily palpable, the government has also been active in pushing forward its inclusion agenda with interlinkages with the infrastructure sector. In this context, despite its limitations, the FY25 Interim Budget has placed an adequate and timely emphasis on the housing sector. With the target of three crore houses for PM Awas Yojana (Grameen) being nearly met, the Finance Minister expanded the scope to include two crore additional houses in the next five years. This has the potential to boost affordable housing, which in turn would support rural infrastructure demand.

Further, the capex thrust is also seen to be integrating the government’s green energy ambitions. As per the FY25 Interim Budget, one crore households would obtain 300 units of free electricity every month through rooftop solarisation. While each household is expected to save between ₹15,000 to ₹18,000 annually, this would help in the creation of solar assets, especially in rural parts of the country.

Some weak spots in the capex story

Notwithstanding the unambiguous policy focus on government capex, there seems to be a slowdown in capex spending by public sector enterprises (PSEs). The PSE capex budget for FY24 has been axed from ₹4.88 trillion in initial Budget estimates to ₹3.26 trillion in the revised estimates. This will result in PSE capex contracting by approximately 10% in FY24. Going forward, PSE capex is budgeted to increase modestly to ₹3.43 trillion in FY25, implying a growth of approximately 5%. As a ratio to GDP, PSE capex is slated to moderate to 1.0% in FY25, the lowest in recent history.

The high point of this Budget is fiscal consolidation. While subdued PSE capex takes away some sheen from the overall capex thrust by government agencies, this is getting compensated by the better-than-expected pace of fiscal consolidation — the FY25 Interim Budget has pegged the fiscal deficit target at 5.1% of GDP, lower than the consensus expectation of 5.3%-5.4%.

With gross g-sec borrowing now slated to moderate to a three-year low of ₹14.13 trillion, the private sector would benefit from better availability of lendable resources, hopefully at a lower rate (the 10Y g-sec yield closed 8 bps lower at 7.06%, its lowest levels in six months). This would bring collateral benefits to the overall economy. Fiscal rectitude and conservatism have been the hallmarks of this government’s Budget making.

Vivek Kumar is Co-Head, Research, QuantEco. Shubhada Rao is Founder, QuantEco

Food inflation stood at around 10% in August.
| Photo Credit: SUSHIL KUMAR VERMA

India’s retail inflation is likely to have retreated below 6% in September after two months over the central bank’s tolerance threshold, thanks to cooling prices for most essential commodities and food items, barring pulses that are seeing a sustained uptick in market prices.

Bank of Baroda economists, who put out a monthly index on essential commodities’ prices, expect consumer price rise last month to have dropped to 5.7% from 6.8% in August and a 15-month high of 7.4% in July. Food inflation stood at around 10% in August.

The National Statistical Office will release the Consumer Price Index (CPI) numbers for September this Thursday. Last Friday, the Monetary Policy Committee of the Reserve Bank of India (RBI) revised its average inflation projections for the July to September quarter from 6.2% to 6.4%. The upgraded estimate implies that the RBI expects September’s retail inflation print to be between 4.9% and 5%.

“Broadly, price pressures assuaged in September, with the reversal of tomato, potato and onion prices being the primary driver. More importantly, the moderation in food prices is broad-based,” said Dipanwita Mazumdar, economist at Bank of Baroda (BoB), noting that the base effects from last September when inflation stood at 7.4% will also alleviate the headline inflation number to an extent.

Pulses play spoilsport

“The only spoilsport continue to be pulses,” she added, with prices of all varieties of dals clocking sharp sequential upticks in September. The bank reckoned that inflation in tur dal year-on-year, hardened to 31.5% last month from 27.3% in August, while moong dal prices rose 10.7% (from 9.2% in August) — their highest rates in 2023.

Rice prices remained sticky, rising 11.1% in September compared to 11% in August, while onion inflation is expected to have sped to 29.5% from 17.6% in the previous month.

The rise in the BoB Essential Commodity Index moderated to 2.9% in September from 6.3% in August, with 35% of the commodities seeing softening price momentum. On a month-on-month basis, the index was down 1.8% from a 0.7% uptick in August, with retail prices of 12 of 20 essential commodities dropping

In a report on food plate costs last week, Crisil Market Intelligence and Analytics estimated a 17% dip in the cost of vegetarian food in September from August levels, while non-vegetarian plates became 9% cheaper. The firm had cited lower tomato and LPG cylinder prices as the main factors for the price correction.

Representational image only.
| Photo Credit: The Hindu

 

Manufacturing firms’ order books and output levels expanded at the fastest pace in nearly three years this August, as per the S&P Global India Manufacturing Purchasing Managers’ Index (PMI) that rose to 58.6 last month from 57.7 in July. 

A reading of over 50 on the index reflects growth in activity levels and August was the 26^th month in a row that the PMI score was above 50.   

Though input costs escalated, firms replenished their inventories at the second highest pace in 18-and-a-half years and restrained from hiking selling prices in tandem with higher costs. Firms raised output costs at the slowest pace in four months, though input costs rose at the fastest pace in a year. 

New orders grew at the fastest pace since January 2021, with export demand seeing the sharpest uptick since November last year. Firms surveyed for the index reported that they had secured new work from clients in Bangladesh, China, Malaysia, Singapore, Taiwan and the U.S. 

To cope with the additional work flow, Indian manufacturers reportedly hired a combination of permanent and temporary staff on both part- and full-time bases. However, overall employment grew at the slowest pace in four months. 

“The presence of stronger cost inflationary pressures serves as a reminder of the challenges inherent in managing growth. Firms addressed rising input prices by lifting selling charges. However, the need to maintain competitiveness helped restricted charge inflation,” noted Pollyanna De Lima, economics associate director at S&P Global Market Intelligence. 

With the manufacturing PMI painting a vibrant picture of the sector in August, Ms. De Lima reckoned the sector looks set to provide a strong contribution to economic growth in the second quarter of 2023-24. Manufacturing GVA (Gross Value Added) grew 4.7% in the first quarter (April to June 2023) as per estimates released by the National Statistical Office on August 31.

“Companies’ strategic focus towards a global orientation were evident via a sharp and quicker expansion in international sales. Export-centric tactics should help ensure that production remains on an upward path in the coming months,” Ms. De Lima said.