India’s industrial production, as measured by the Index of Industrial Production (IIP), witnessed a significant uptick in September 2023, reversing the contraction observed in the previous month. The IIP grew by 3.1% year-on-year, primarily driven by a resurgence in manufacturing activity.
Manufacturing Sector Leads the Recovery The manufacturing sector emerged as the key driver of the IIP’s improvement, expanding by 3.9% year-on-year in September. This marked a substantial acceleration compared to the 1.1% growth recorded in August. The uptick was particularly pronounced in capital-intensive sectors like electrical machinery, transport equipment, and petroleum.
A Mixed Bag for Export-Oriented Industries While the domestic manufacturing sector showed signs of recovery, export-oriented industries, including apparel, textiles, and leather, continued to face headwinds. These sectors experienced a further slowdown in September, reflecting persistent sluggishness in global demand.
Power Sector Recovers from Monsoon Slump The power sector also contributed to the overall IIP growth, with output expanding by 0.5% year-on-year in September. This marked a significant improvement from the contraction of 3.7% in the previous month. The recovery in power generation was attributed to a decline in rainfall and a subsequent rise in power demand.
Consumer Demand Shows Signs of Life The uptick in consumer durables and non-durable goods production is a positive indicator of improving consumer sentiment. Economists believe that the festive season, coupled with a healthy monsoon, could further boost consumption demand and drive industrial activity in the coming months.
Outlook for the Future While the September IIP data offers some respite, challenges remain. The impact of unfavourable base effects and potential global economic slowdown could weigh on industrial growth in the near term. However, sustained government investment in infrastructure and a pickup in rural demand could support a moderate recovery in the manufacturing sector.
Industry Experts’ Perspective
- DK Joshi, Chief Economist, Crisil: “The improvement in infrastructure and construction-related goods, coupled with the festive season boost, could further propel industrial activity.”
- Suman Chowdhury, Chief Economist, Acuite Ratings & Research: “While we anticipate a significant boost in industrial output from October onwards, the overall growth for FY25 is expected to be more tempered.”
As India’s economy navigates a complex global landscape, the performance of the manufacturing sector will be crucial in determining the country’s overall economic trajectory.
