Thursday, 10 Oct, 2024
By: Anshul Vipat
Index of Industrial Production (IIP) maps the change in the volume of production in Indian industries usually of a month, as against the reference period. Image Source: IANS
Industrial production was hit hard during the pandemic period. It had shrunk 57.3 percent in April 2020 due to a decline in economic activities. Thereafter, it remained below 4.4% throughout the year and touched the lowest level of 1 percent in November as well as December 2021.
The Index of Industrial Production (IIP) rose by 3.1 per cent to 133.5 in September, according to official data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Friday.
The numbers gives hope for the industrial sector which saw a contraction in August. India's industrial output had slipped to an 18-month low contracting by 0.8 percent in August, mainly due to a decline in output of the manufacturing and mining sectors.
Index of Industrial Production (IIP) maps the change in the volume of production in Indian industries usually of a month, as against the reference period. It is a composite indicator of the general level of industrial activity in the economy. According to the data, the September growth was aided by all major sectors like mining, which rose 4.6 percent to 99.5 in September, manufacturing sector, which grew 1.8 percent to 134.3, and the electricity sector, which soared 11.6 percent to 187.4. Last month, the electricity sector was the only one of the three to register an increase in output.
Among used based goods, the primary goods output rose 9.3 percent in September this year, while that of capital goods jumped 10.3 per cent. Intermediate goods output rose 2.0 per cent and infrastructure/construction goods climbed 7.4 per cent, while consumer durables slipped by (-) 4.5 per cent and consumer non-durables declined (-) 7.1 per cent, as per the data.
These sub-components of the index is considered more important. For example, a growth in consumer driven industries signifies increase in demand for consumer goods and denotes higher purchasing power of people. Similarly, a recovery in capital goods sectors shows industrial growth.
However, the slump in consumer durables and non-durables signals low consumer consumption which may have been affected due to high inflation.
Industrial production was hit hard during the pandemic period. It had shrank 57.3 percent in April 2020 due to a decline in economic activities. Thereafter, it remained below 4.4% throughout the year and touched the lowest level of 1 percent in November as well as December 2021.
The festive season has proved wonders for the market. Many product groups across the manufacturing sector expected a noticeable improvement in the festival season that starts from Onam, covers Durga Puja, and ends with Diwali. It needs to be seen whether this momentum would sustain beyond the festive cheer.
Optimistic market
The numbers are encouraging considering the unexpected contraction in August. IIP data corroborates the findings of the PMI manufacturing survey, which showed decent expansion of the sector in both September and October. The seasonally-adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI) was 55.1 in September to 55.3 in October. A print above 50 means expansion while that below 50 suggests contraction. PMI data pointed to an improvement in overall operating conditions for the 16th month in a row.
The consumer sentiment index is also all-time high indicating bright future for the manufacturing sector
While the figures are definitely positive, it’s important that the growth remains sustained for longer period. That can happen provided other economic indicators show positive outlook. The consumer price index, for instance is expected to ease in October after a record high in September. Most worrying was the data on food inflation that had hit the highest mark in last 22 months. Inflation rate for vegetables was a distressingly high 18.05 percent. This was really hurting the pockets of lower income Indians as food has a weight of 54 percent in the consumer price index. The high inflation reduced the consumption which in turn contributed to the negative growth in industrial production.
