India’s factory output growth slowed down to 3.7% in June from a 5.2% rise seen in May, and a 4.5% increase in April, due to weaker manufacturing growth, official data released on Friday showed.
Index of Industrial Production (IIP), or the factory output growth, stood at 12.6% in June 2022, mainly due to a lower base effect.
“The growth rates over corresponding period of previous year are to be interpreted considering the unusual circumstances on account of covid-19 pandemic since March 2020,” said an official statement.
IIP growth was below the projections made by economists at Bank of Baroda, who had pegged it at 5.5% during June.
Manufacturing growth was at 3.1% and brought down the overall growth rate, with 14 of 23 sectors in manufacturing registering negative growth, said Madan Sabnavis, chief economist at Bank of Baroda.
“The significant non-performers were food, textile related and electronics amongst others. The performance of electronics is a disappointment as this industry had been a front runner for the PLI scheme,” Sabnavis said.
“The third quarter will be crucial for the manufacturing sector as this would be the time when the festival demand would add to growth. Here, both rural and urban demand would matter,” he added.
As per the IIP data released by the National Statistical Office (NSO), manufacturing sector output grew at 3.1% in June, against a 12.9% expansion in the year-ago period.
Similarly, electricity generation saw a growth of 4.2% in June 2023 compared to a growth of 16.4% a year ago.
Mining output saw a growth of 7.6% during the month against a 7.8% rise in the year-ago period, and the capital goods segment grew 2.2% compared to 28.6% a year ago.
During the April-June quarter of fiscal 2024, IIP growth stood at 4.5%, down from 12.9% in the year-ago period.
Consumer durables output fell in June by -6.9% against 25.2% growth in the year-ago period. Consumer non-durable goods output increased 1.2 % compared to 2.9% a year earlier.
“The YoY growth in the IIP slid to a weaker-than-expected three-month low of 3.7% in June 2023 belying the hope engendered by the core sector print. The sequential slowdown was led by the manufacturing sector, while the mining and electricity sectors witnessed an improvement in their growth performance amid deficient rainfall in the month,” said Aditi Nayar, Chief Economist, Head of Research and Outreach, ICRA Ltd.
“On the use-based side, output of consumer durables contracted by a sharp 6.9% YoY led by a continued contraction in exports of such items. Moreover, growth in the output of capital goods and consumer non-durables slowed down sharply relative to May 2023,” Nayar added.
