India’s Industrial Output Expands After Six Months In September

India’s factory output rose after six months of decline in September, led by higher power generation and mining activity.

The Index of Industrial Production grew 0.2% year-on-year in September compared with a revised contraction of 7.36% in August, according to data released by the Ministry of Statistics and Programme Implementation. That compares with a contraction of 1.9% forecast by 34 economists polled by Bloomberg.

For the first half of the financial year, IIP has contracted by 21.1% over the same period last year.

"Positive industrial production data adds to a series of high-frequency indicators showing activity improving at a faster pace than we had earlier anticipated," said Rahul Bajoria, chief India economist at Barclays.

Devendra Pant, chief economist at CARE Ratings, however, cautioned that the growth in industrial production would not have been possible without the low base of last year. Factory output had contacted by 4.6% in September 2019; as such, whether this recovery is sustainable or not would depend on how the data comes in over the next few months, he said.

India’s manufacturing sector continued to see contraction in September, albeit at a slower pace. Fifteen of the 23 industry groups in manufacturing saw a contraction in output in September. Mining output and electricity generation activity, however, grew.

Sectoral Estimates

• Manufacturing output contracted 0.6% in September compared to a contraction of 7.8% in August.
• Mining output increased 1.4% against a contraction of 9% last month.
• Electricity generation rose 4.9% compared with a contraction of 1.8% in August.

Industrial output, as classified by the end-use of goods, continued to show a pickup in consumer non-durables. Besides, output of infrastructure and construction goods and consumer durables, both returned growth.

• Primary goods output contracted 1.5% in September compared with a contraction of 10.8% in August.
• Capital goods output contracted 3.3% against a contraction of 14.7% in the previous month.
• Intermediate goods output contracted 1.4% compared with a contraction of 6% last month.
• Infrastructure and construction goods output rose 0.7% against a contraction of 1.6% in August.
• Consumer durables output rose 2.8% against a contraction of 9.6% last month.
• Consumer non-durables output rose 4.1% compared with a contraction of 2.3% in August.