India IIP Data: Industrial Production Revives In November

India’s industrial output rebounded in November after three consecutive months of contraction. The rebound, along with other high-frequency indicators, suggests some stability in the economy even though signs of recovery remain modest.

The Index of Industrial Production rose 1.8 percent in November over a year ago, compared to a contraction of 3.84 percent in October, according to a release by the Ministry of Statistics and Programme Implementation. The cumulative year-on-year growth for the April-November period stands at 0.6 percent compared to a growth rate of 5 percent in the same duration the previous year.

Thirty two economists polled by Bloomberg had forecast November IIP growth at 0.3 percent.

A favourable base effect led to the IIP posting a turnaround to a mild growth in November, said Aditi Nayar, principal economist at ICRA. “Although the pace trailed our expectations.”

Sectoral Estimates

A break-up of the index shows that 13 of 23 manufacturing industry groups saw growth in November. That compares with just five categories growing in October. Overall, an improvement in the manufacturing segment, which makes up over three-fourth of the index, led to industrial output growth.

• Mining output growth stood at 1.7 percent in November against a contraction of 8 percent in October.
• Manufacturing output growth stood at 2.7 percent in November compared to a contraction of 2.1 percent in the preceding month.
• Electricity generation contracted 5 percent compared with a contraction of 12.2 percent in the preceding month.

Manufacturing of motor vehicles, trailers and semi-trailers, food products, tobacco, machinery and equipment, computer, electronic and optical products, were some major segments that continued to contract in November.

Growth of mining output will strengthen in December, while the pace of contraction of electricity generation will narrow, supporting the overall performance of the IIP, ICRA’s Nayar said. But waning of the favourable base effect may result in manufacturing, and the overall IIP, reverting to a “disappointing contraction” in December, she cautioned.

Industrial output, when broken up by the end-use of goods, showed contraction across most major categories except intermediate goods and consumer non-durables.

• Primary goods output contracted 0.3 percent in November against a contraction of 6 percent in October.
• Capital goods output contracted 8.6 percent against a contraction of 21.9 percent growth in the previous month.
• Intermediate goods output grew 17.1 percent compared with a growth of 22.2 percent in October.
• Infrastructure and construction goods output contracted 3.5 percent compared with a contraction of 9.2 percent last month.
• Consumer durables output contracted 1.5 percent compared with a contraction of 18 percent in the previous month.
• Consumer non-durables output grew 2 percent against a contraction of 1.1 percent in October.

While the turnaround in factory output growth is a welcome sign, it still cannot be interpreted as some kind of a “green shoot” on the industrial front, Sunil Kumar Sinha, principal economist at India Ratings, said. That’s because a number of key use-based sectors like consumer durables, capital goods, basic goods and infrastructure goods, according to him, are still showing “de-growth”.