India’s Industrial Output Growth Accelerates to 8% in August on Manufacturing, Power

Manufacturing expands 9% while electricity and gas supply posts its strongest growth since May 2024

India’s industrial output growth accelerated to 8 per cent in August, marking its second-fastest expansion in more than two years, according to data released by the National Statistics Office (NSO) on Monday. Strong manufacturing and electricity output supported the increase, despite a sharper contraction in mining activity.

August’s industrial output growth was the second-highest in 29 months, after the 8.8 per cent expansion recorded in June. Industrial output growth for July was also revised upwards to 7.4 per cent from the earlier estimate of 6.7 per cent.

Manufacturing Growth Strengthens

The improvement in manufacturing comes as the festive season gets under way.

Of the four broad sectors, manufacturing and electricity and gas supply recorded stronger growth in August than in the previous month. Water supply, sewerage and waste management recorded slower growth, while mining and quarrying contracted at a faster pace.

Manufacturing, which accounts for about 76 per cent of the weighting in the Index of Industrial Production, grew 9 per cent in August, compared with a revised 8.2 per cent in July. This was the sector’s second-highest growth in 29 months and marked its third consecutive month of growth at 8 per cent or above.

According to Rahul Agrawal, principal economist at ICRA, manufacturing growth benefited from a favourable base because of inventory recalibration during the same month a year earlier, ahead of the implementation of Goods and Services Tax (GST) rate cuts.

Electrical Equipment Leads Industry Groups

At the two-digit level, 18 of the 23 industry groups within manufacturing recorded year-on-year growth.

Electrical equipment recorded the highest growth at 30.9 per cent. Other transport equipment followed with 25.3 per cent, while motor vehicles, trailers and semi-trailers grew 25.2 per cent.

Rubber and plastics products increased 21.4 per cent, computer, electronic and optical products rose 19.3 per cent, and beverages grew 18.3 per cent.

Five industry groups recorded contractions. Tobacco products declined 8 per cent, wearing apparel fell 7.4 per cent, coke and refined petroleum products declined 0.6 per cent, chemical products fell 0.5 per cent, and paper products contracted 0.1 per cent.

Electricity and Gas Supply Growth Hits 12.3%

Electricity and gas supply was the fastest-growing segment among the four major sectors in August.

Its growth increased to 12.3 per cent from 8.7 per cent in July, marking its highest level since May 2024.

Renewable generation increased 15.4 per cent, while non-renewable generation grew 12.3 per cent. Gas supply, however, declined 2.4 per cent, reflecting the continued impact of the West Asia crisis.

Water supply, sewerage and waste management grew 6.3 per cent in August, down from 7.4 per cent in July.

Mining and quarrying recorded a 5.6 per cent contraction, compared with a 0.9 per cent decline in July.

Within mining, non-metallic minerals declined 12.8 per cent and fuel minerals fell 5.7 per cent, while metallic minerals grew 5 per cent.

Capital Goods Growth Remains Strong

Under the use-based classification, four of the six categories recorded slower growth in August than in July.

Capital goods posted the fastest growth among the categories at 16.9 per cent, although the pace was lower than the 19 per cent recorded in July.

Infrastructure and construction goods growth slowed to 6.4 per cent from 8 per cent, while primary goods growth declined to 3.5 per cent from 4.2 per cent.

Consumer durables grew 11.1 per cent, compared with 12 per cent in July.

In contrast, intermediate goods growth accelerated to 13.7 per cent from 10.4 per cent in July.

Consumer non-durables returned to growth, although the increase remained modest at 2.1 per cent after a contraction of 0.8 per cent in July.

“Higher prices and low purchasing power have affected demand and hence production,” noted Madan Sabnavis, chief economist at Bank of Baroda.

Industrial Output Growth Rises in April-August

Sabnavis said, “The revival in industrial growth is a positive sign, as this has been witnessed in the last few months. Growth in credit to industry has also been very high and broad-based, supporting the hypothesis of the sector recovering quite rapidly this year to contribute positively to overall growth.”

Between April and August, industrial output grew 6.7 per cent, compared with 4.2 per cent during the same period last year.

Sabnavis said that if the momentum continues, India can register growth of 7-8 per cent for the year, supported by higher growth during the festival season as demand builds up.