NEW DELHI: Industrial output growth slowed down to 3.2% in October due to a sharp moderation in manufacturing activity, raising concerns that the economic revival was losing steam as was also seen in some of the other indicators.
While the increase in the index of industrial production (IIP) hovered around September 2021 level of 3.3%, it had slowed from the 4.5% reading in October 2020.
Apart from manufacturing, which grew 2%, electricity too witnessed a 3.1% expansion with mining being the sole sector posting a strong growth. The numbers threw up a few other worrying trends as the capital goods segment witnessed a contraction of 1.1% in October, while consumer durables output fell over 6%, the second straight month of decline, largely due to chip shortage impacting automobile deliveries. Consumer non-durables just about managed to stay in the black with 0.5% increase in output.
“Even as the ongoing supply challenges in the auto sector persisted, the YoY performance of several other high frequency indicators deteriorated in November 2021, including electricity demand, GST e-way bills, port cargo traffic, etc, suggesting that economic activity lost steam after the festive season ended, with a satiation of pent-up demand,” said Aditi Nayar, chief economist at ratings agency ICRA.
The numbers indicated that the festival season boost was negated by some of the supply side issues and the low growth phenomenon in the sector is not seen to be going away immediately, especially with the government acknowledging that chip shortage will persist.
“Industrial output is likely to follow the same trend as observed in the Periodic Labour Force Survey and weak private final consumption expenditure depicted in second quarter 2021-22 GDP numbers. Omicron could be a disruptor in coming months. Expect a weak set of IIP numbers in rest of FY22. Weak consumption and investment trend imply that the heavy lifting to take economy out of sluggish growth has to be done by the government,” said Devendra Kumar Pant, chief economist, India Ratings & Research.
The government is seen to be pushing for a capex boost to ensure that there is sufficient demand for inputs such a cement and steel.
While the increase in the index of industrial production (IIP) hovered around September 2021 level of 3.3%, it had slowed from the 4.5% reading in October 2020.
Apart from manufacturing, which grew 2%, electricity too witnessed a 3.1% expansion with mining being the sole sector posting a strong growth. The numbers threw up a few other worrying trends as the capital goods segment witnessed a contraction of 1.1% in October, while consumer durables output fell over 6%, the second straight month of decline, largely due to chip shortage impacting automobile deliveries. Consumer non-durables just about managed to stay in the black with 0.5% increase in output.
“Even as the ongoing supply challenges in the auto sector persisted, the YoY performance of several other high frequency indicators deteriorated in November 2021, including electricity demand, GST e-way bills, port cargo traffic, etc, suggesting that economic activity lost steam after the festive season ended, with a satiation of pent-up demand,” said Aditi Nayar, chief economist at ratings agency ICRA.
The numbers indicated that the festival season boost was negated by some of the supply side issues and the low growth phenomenon in the sector is not seen to be going away immediately, especially with the government acknowledging that chip shortage will persist.
“Industrial output is likely to follow the same trend as observed in the Periodic Labour Force Survey and weak private final consumption expenditure depicted in second quarter 2021-22 GDP numbers. Omicron could be a disruptor in coming months. Expect a weak set of IIP numbers in rest of FY22. Weak consumption and investment trend imply that the heavy lifting to take economy out of sluggish growth has to be done by the government,” said Devendra Kumar Pant, chief economist, India Ratings & Research.
The government is seen to be pushing for a capex boost to ensure that there is sufficient demand for inputs such a cement and steel.
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