Manufacturing Leads Industrial Production Uptrends

By: Damini Mehta

Manufacturing sector, which contracted at 5.8% in October 2022 grew at 10.4% this time. Electricity sector saw the largest jump in growth from 1.2% in October 2022 to 20.4% this time.

In October of last year, India’s industrial sector faced a major setback as the growth rate in the sector ventured into a negative territory of -4.1%. This time, the factory output, which is measured by the Index of Industrial production (IIP) calculated by the National Statistical Office (NSO) reached a 16-month high of 11.7%. The uptick is driven by a favorable base effect and a revival of the Indian economy. However, the coming months might not be as kind as a slowing global economic order has been putting pressure on Indian exports. For now, the news brings some relief.

Source: NSO

The positive growth in industrial production is not isolated to one sector alone. According to NSO numbers, the Mining sector registered a six fold jump in growth in October 2023 compared to the same time last year from 2.6% to 13.1%. Manufacturing sector, which contracted at 5.8% in October 2022 grew at 10.4% this time. Electricity sector saw the largest jump in growth from 1.2% in October 2022 to 20.4% this time.

A use based analysis of IIP numbers indicates that the consumer non-durables segment which contracted at 13% in October 2022 (compared to October 2021) grew by 8.6% y-o-y. Consumer durables segment recorded the largest shift in y-o-y growth from a -18.1% contraction in October 2022 to 15.9% growth in the same month this year.

Capital goods growth, which also points towards a positive investment sentiment in the economy witnessed a 22.6% y-o-y growth in October compared to a contraction of 2.9% same time last year.

Source: NSO

Within the manufacturing sector, manufacture of machinery and equipment, manufacture of motor vehicles, trailers and semi-trailers and manufacture of other transport equipment were the top three performers with growth upwards of 24% across these segments. This is apart from ‘other manufacturing’ which registered a 30.9% growth. Manufacture of furniture, manufacture of computer, electronic and optical products, and manufacture of wearing apparel lagged behind with all three segments contracting by more than 5 per cent each.

Notably, a revival in industrial production compared to a negative growth across several sectors and segments last year spells good for the Indian economy. Keeping in mind the government’s push for manufacturing and domestic production and the change in growth forecasts, if other factors such as global demand and agriculture yield favor, 2023-24 will likely be the year when the country marks a clear way out of the impact of declining growth of the previous few years after COVID.