India’s industrial output surged at a 14-month high pace of 10.3% in August, from a 6% rise in July, aided by favourable base effects from last year when production levels had contracted 0.7% and the best manufacturing performance since this April.
Electricity and mining rose a sharp 15.3% and 12.3%, respectively. Manufacturing output rose 9.3% in August, with just seven of 23 major segments recording a contraction compared with nine in July. The export-dependent apparel and chemicals sectors saw production dropped 17.1% and 4.3%, respectively. Computers and electronics’ output also fell 8.7%.
Consumer goods’ production reflected a mixed trend, although durables’ output grew for the first time in three months, at 5.7%, and hit the highest levels since September 2022. Non-durable consumer items’ output jumped 9% year, but was 3.9% below July levels. Moreover, base effects played a role in their uptick, as durables’ output had dropped 4.4% last August, while non-durables had plummeted 9%.
Three of the six use-based segments recorded a double-digit surge, on top of positive growth recorded last year, led by infrastructure and construction goods which grew in double digits for the fifth successive month, at 14.9%. Capital goods’ output jumped 12.6%, with production reaching the highest levels in 2023-24, indicating strengthening investment demand. Primary goods grew 12.4% and intermediate goods rose 6.5%.
“We need to see if this buoyancy gets reflected in the sales of India Inc in their second quarter results,” said Bank of Baroda chief economist Madan Sabnavis. “The next two months should ideally see sustained growth if rural demand revives – this has been a lacuna so far,” he noted.
“In the coming months, the external environment will be a drag, as major western economies decelerate,” said Dipti Deshpande, principal economist at Crisil. “The impact of uneven monsoon on rural demand remains to be seen and the transmission of rate hikes to lending rates could also temper domestic demand,” she said.
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