In July, India's industries experienced a significant upswing, with a 5.7% growth rate, the highest in five months.
This growth was mainly fueled by an impressive 8% increase in electricity generation and moderate progress in manufacturing at 4.6%.
These positive factors helped offset a 3.3% decline in mining and a second consecutive month of reduction in the production of consumer durables.
Key Points:
Industrial growth at 5.7% in July, the best in five months.
Electricity generation surged by 8%.
Manufacturing expanded by 4.6%, contributing to overall growth.
Mining sector contracted by 3.3%.
Consumer durables production continued to shrink but at a reduced rate of 2.7% in July.
Robust growth in infrastructure and construction goods, up by 11.4%.
In terms of the Index of Industrial Production (IIP), the initial estimate put June's growth rate at a three-month low of 3.7%, but it was later revised slightly upward to 3.75%.
This marks the sharpest industrial output growth since February 2023, when it increased by 5.8% year-on-year.
However, despite the growth, July's production levels were relatively low, 1.04% lower than June.
Capital goods output, reflecting planned investments, bounced back with a 4.6% year-on-year growth in July, recovering from a low of 2.2% in June.
Nevertheless, absolute output levels were at a three-month low, 4.6% lower than June.
While there are positive signs, some challenges remain. Nine manufacturing industries, including electronics, recorded negative growth, which is concerning, especially for sectors in production-linked incentive schemes.
Textiles also underperformed due to export difficulties.
The sustainability of this industrial growth depends on the revival of consumer goods demand, which will become clearer in the coming months. High inflation and reduced pent-up demand may pose challenges, though July's figures provide some encouragement for the Reserve Bank of India.
Economists anticipate industrial growth to range from 5% to 7% in August, partly due to favorable comparisons with the same period last year when industrial production contracted by 0.7%.
Stay tuned for more updates on India's industrial landscape with SRIRAM's, where growth meets opportunity.
What Is the Index of Industrial Production (IIP)?
The Index of Industrial Production (IIP) is a crucial economic indicator for India. It tracks and reports the growth and changes in various sectors of the economy, including mineral mining, electricity generation, and manufacturing.
This composite index provides insights into the short-term fluctuations in the production volume of a designated basket of industrial products during a specific period compared to a chosen base period.
Who Compiles and Publishes the IIP?
The IIP is compiled and published on a monthly basis by the National Statistics Office (NSO), which operates under the Ministry of Statistical and Programme Implementation.
The data is typically released six weeks after the reference month concludes.
What Does the IIP Level Represent?
The IIP level is a numerical representation that indicates the status of production in the industrial sector for a particular period in comparison to a reference period.
To create this index, a base year is selected as a benchmark. Previously, the base year was fixed at 1993–94, with an index level of 100. However, the current base year is 2011-2012.
What Are the Eight Core Industries Included in the IIP?
The Eight Core Industries play a significant role in the composition of the IIP, collectively accounting for nearly 40.27% of the weight of the items included in the index.
These core industries, arranged in descending order of their share, are as follows:
Refinery products
Electricity
Steel
Coal
Crude oil
Natural gas
Cement
Fertilisers
These core industries are crucial components of India's industrial production landscape and have a substantial impact on the overall economy.
In essence, the IIP serves as a vital tool for assessing and monitoring the performance of India's industrial sectors, guiding economic policies, and providing insights into short-term production trends.
