IIP: India’s Industrial Output Growth At 3.1% In May

After a sharp rebound in April, India’s factory output growth moderated in May due to a slowdown in manufacturing and mining.

The Index for Industrial Production rose 3.1 percent in May 2019, compared with a revised estimate of 4.3 percent increase in April, according to the Ministry of Statistics and Implementation. The figure was higher than 2.9 percent estimated by 32 economists polled by Bloomberg.

Economic activity has slowed in India because of falling consumer demand and tight liquidity. Private investments, too, have taken a hit from global headwinds like the U.S.-China trade war. The Reserve Bank of India addressed growth concerns by cutting interest rates to a nine-year low, hoping that a looser monetary policy coupled with higher capacity utilisation may improve investment activity.

Sectoral Estimates

• Manufacturing output growth stood at 2.5 percent in May compared with 2.8 percent in April.
• Mining output rose 3.2 percent compared with 5.1 percent last month.
• Electricity generation rose 7.4 percent compared with 6 percent last year.

Industrial output, as classified by the end-use of goods, showed yet another fluctuation. Output of capital goods and consumer durables, in April, had grown after declining sharply in March. However, growth in both again slowed in May.

• Primary goods output rose 2.5 percent compared with 5.2 percent in April.
• Capital goods output rose 0.8 percent in May against a 2.5 percent fall in April.
• Intermediate goods output growth stood at 0.6 percent compared with 1 percent in the previous month.
• Infrastructure and construction goods output grew 5.5 percent compared with a 1.7 percent rise in April.
• Consumer durables output fell 0.1 percent compared with a 2.4 percent growth in April.
• Consumer non-durables output grew 7.7 percent, up from a 5.2 percent growth in the previous month.

The lead indicators of industrial growth—primary goods and intermediate goods—do not instill confidence on near-term recovery, which is expected to be lacklustre in next couple of months, said Devendra Pant, chief economist at India Ratings. Generally, infrastructure and construction activities slow down during the monsoon period but the last year was an exception, he said. “One has to wait and watch whether the exceptional trend of last year would continue.”