Factory output: India’s industrial production at 3.8% in January

India's industrial output growth stood at 3.8% in January, unchanged month-on-month, indicating the steady pace of growth for the Indian economy.

The latest factory output, based on the Index of Industrial Production (IIP), indicated a sustained increase in manufacturing momentum into January, following a revival in December after a slowdown in the preceding months. In the April-January period, factory output expanded 5.9%, a notch above the 5.5% figure in the same time a year earlier.

Output in manufacturing rose 3.2%, mining grew 5.9%, and power 5.6%. The manufacturing sector accounts for over 77% of the industrial output.

The major boost to manufacturing came from motor vehicles, trailers and semi-trailers, transport equipment as well as furniture, which may be linked with performance of the housing sector.

Eight of the 23 sectors had negative growth rates including food, garments, paper, coke, chemicals and electronics, which is also incentivized by the Production-Linked Incentive (PLI) scheme.

The annual growth of capital, intermediate and consumer durable goods at 4.1%, 4.8% and 10.9% were at three-month highs in January. Output of intermediate goods picked up due to higher exports in January coupled with a favourable base effect, experts noted.

Consumer non-durables registered a contraction of 0.3% year-on-year in January from a on-year growth of 2.4% a month ago, indicating muted consumption demand especially from the household belonging to the lower 50% of the income bracket. But, high-frequency indicators such as petroleum consumption, coal, steel production, grew in the range of 5.7%-13.8% in February 2024.

“The silver lining of the January 2024 IIP data though is that the output level of all use-based segments are above the pre-COVID level (February 2020) after a gap of 33 months. Overall, the factory output was 14.0% higher than the pre-COVID level in January 2024. At the 2-digit level, 13 industries had a production level higher than the pre-COVID period,” said Sunil Kumar Sinha, principal economist at India Ratings and Research.

In the coming months infrastructure industries are expected to get a boost as states and Centre would look to meet their annual capex targets. This is likely to keep IIP growth rates between 5% and 6% in the remaining two months of FY24.