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IIP: Industrial Output Growth At Six-Month High Of 3.4% In April

Manufacturing activity, which contracted in the previous two months, rose in April.

Sparks fly as an employee uses an angle grinder inside an Ishwar Engineering Co. factory in Mumbai, Maharashtra, India.(Photographer: Dhiraj Singh/Bloomberg)
Sparks fly as an employee uses an angle grinder inside an Ishwar Engineering Co. factory in Mumbai, Maharashtra, India.(Photographer: Dhiraj Singh/Bloomberg)

India’s factory output rebounded from a 21-month low in April on the back of growth in manufacturing, mining and electricity generation.

The Index for Industrial Production rose 3.4 percent in April 2019, compared with 3.6 percent increase in the same month a year ago, according to the Ministry of Statistics and Implementation. In March this year, IIP had contracted 0.1 percent—the first decline in 21 months.

The one-month should be read with caution given the history of volatility in the IIP data, said India Ratings and Research.

On the whole picture is not very encouraging on the industrial production front. India Ratings and Research has been consistently articulating that given the fluctuation in the IIP growth data it is difficult to believe that we are on our way or anywhere near to a broad based and sustainable industrial recovery.
Sunil Kumar Sinha, Principal Economist, India Ratings

The 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 trade war uncertainty between U.S. and China. The Reserve Bank of India tried to address the weakening growth by cutting interest rates in India to a nine-year low.

The rebound in factory output in April came as a surprise as the Bloomberg poll of economists had expected the index to grow 0.6 percent against the actual reading of 3.4 percent. According to the data released by the ministry:

  • Manufacturing output growth stood at 2.8 percent in April compared with 4.9 percent in the same month last year. But it rebounded from contraction in the last two months.
  • Mining output rose 5.1 percent compared with 3.8 percent last year. The sector had grown 0.8 percent in March.
  • Electricity generation rose 6 percent compared with 2.1 percent last year. Growth was at 2.2 percent in March.

Industrial output, as classified by the end-use of goods, showed a rise in output of both capital goods and consumer goods. The two had declined sharply in the previous month.

  • Primary goods output rose 5.2 percent compared with 2.5 percent in March.
  • Capital goods output rose 2.5 percent in April against an 8.7 percent fall in March.
  • Intermediate goods output growth stood at 1 percent, a rebound from a 2.5 percent decline in March.
  • Infrastructure and construction goods output grew 1.7 percent, compared with a 6.4 percent rise in March.
  • Consumer durables output rose 2.4 percent, compared with a 5.1 percent decline in March.
  • Consumer non durables output grew 5.2 percent, up from a 0.3 percent growth in March.
On the use-based side, on a year-on-year basis, pick-up in growth was seen in primary goods, consumer goods (both durables and non-durables), capital goods, and intermediates, while infra growth slowed. The pick-up in capital goods production, after three consecutive months of contraction, was led by high growth in centrifuge and ship building.
IDFC Economic Research