India’s June industrial output growth slows down to a three-month low.

India's June industrial output growth slows down to a three-month low.

India’s Industrial Output Growth Slows to Three-Month Low

India’s industrial output

India’s industrial output growth rate slipped to a three-month low of 3.7% year-on-year in June, according to data from the Ministry of Statistics. This comes as a disappointment to analysts who had anticipated an expansion of 5.0%. The previous month’s figure for May was revised slightly higher to 5.3% from 5.2%.

The manufacturing sector, which constitutes approximately 17% of India’s economy, recorded a modest growth of 3.1% in June. This represents a slowdown from the revised annual growth rate of 5.8% reported in May. Meanwhile, electricity generation during June saw a 4.2% increase from the same month the previous year, and mining activities grew by 7.6%.

“The sequential slowdown was led by the manufacturing sector, while the mining and electricity sectors witnessed an improvement in their growth performance amid deficient rainfall in the month,” stated Aditi Nayar, an economist at ICRA.

Here is a chart illustrating the trend in India’s industrial output growth:

Industrial Output Growth

India’s central bank predicts the economy to grow by 6.5% in the fiscal year ending in March, primarily driven by government capital spending. In June, infrastructure or construction goods production grew by 11.3% year-on-year, maintaining the same growth rate reported in May. Capital goods also experienced modest growth of 2.2% compared to the previous year.

Despite the slight improvements in certain sectors, consumer spending remains weak. Consumer durables output contracted by 6.9% year-on-year in June, compared to a revised year-on-year growth of 1.2% in the previous month. Additionally, consumer non-durables recorded a growth rate of 1.2% year-on-year, a significant decline from the revised growth rate of 7.6% in May.

The sluggish growth in consumer non-durables and the contraction in consumer durables raise concerns about the revival of consumption. Devendra Pant, Chief Economist at India Ratings & Research, expressed his apprehension, stating that “unless consumption demand revives, it is difficult to have a sustained consumption and investment recovery.”

While the overall industrial output growth rate for June fell short of expectations, there are some positive signs, particularly in electricity generation and mining activities. However, it is essential to address the challenges faced by the manufacturing sector and revive consumer spending for a more robust and sustained recovery in India’s economy.