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India’s industrial output grew 5.2% in January, slightly faster than the 4.7% rise in December 2022, bolstered by a double-digit surge in electricity generation for the third successive month, even as manufacturing output growth stayed tepid at 3.7%.
Consumer durables output contracted for the second month in a row, falling 7.5% in January, a tad lower than the 11% drop in December. The contraction in output came on top of a 4.4% fall in January 2022.
Consumer non-durables production, which had slumped 13% in October 2022, grew 6.2% in January, marking the slowest growth rate in three months. Output levels fell 5.7% sequentially from December 2022 levels, signalling weakening consumption trends.
On end-use basis, intermediate goods output was virtually flat year-on-year, but capital goods production jumped 11% while primary goods grew 9.6%. While both segments’ uptick was buoyed by low sub-2% growth rates a year ago, infrastructure and construction goods’ output grew 8.1% this January compared to a nearly 6% rise in the same month last year.
Manufacturing growth at 3.7% was on the lower side given that growth was just 1.9% last year, with textiles and electronics pulling the month’s output measure down, said Bank of Baroda chief economist Madan Sabnavis. The textiles sector, he reckoned, had been hit by rising costs and declining exports.
“The computers and electronics group which was to benefit the most from the Production Linked Incentive scheme, dropped 29.6%. Given a 3% contraction between April 2022 and January 2023, it looks like those gains have not yet accrued,” he said.
High inflation, rising interest rates, weak external demand and waning domestic pent-up demand pose downside risks for the momentum in industrial activity going forward, noted CARE Ratings chief economist Rajani Sinha.
ICRA chief economist Aditi Nayar expects growth in the Index of Industrial Production (IIP) to dip in February to anywhere between 3% and 5% in February, based on weaker performance of indicators such as rail freight and ports cargo traffic, electricity generation, auto output and coal production.
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