Factory output’s slower March doesn’t dampen annual momentum

Industrial production expanded 5.8% in FY24, faster than the 5.2% expansion in the year before

Rhik Kundu
First Published10 May 2024
India's factory output in the March quarter fell short of expectations. (Mint)
India’s factory output in the March quarter fell short of expectations. (Mint)

India’s factory output slowed to 4.9% in March after rising to a four-month high of 5.6% in the month before, hitting the brakes on an otherwise good year.

Industrial production expanded 5.8% during FY 2023-24, higher than the 5.2% expansion reported for the year prior, show data released on Friday.

But the March numbers fell short of expectations. Economists polled by Reuters had forecast industrial output in March to grow at 5.1%. If it’s any consolation, industrial output in March 2023 had grown at a mere 1.9%.

Since the beginning of FY24, though, India’s industrial output gathered momentum, racing to 10.9% and 11.9% growth in August and October, respectively, driven by higher mining output and festive demand for manufactured items and increased electricity generation. 

Industrial output growth slowed to 2.5% in November but has since recovered. 

Strong consumer sentiment

Manufacturing output in March rose 5.2% year-on-year, faster than the 1.5% recorded in the same month of the previous year. Mining activity, though, increased at a slower pace of 1.2% as compared with the 6.8% rise in March last year.

But consumer durables production, which highlights consumer sentiment, grew by 9.5% during the month after contracting 8% in March 2023.

"Consumer goods have shown a revival buttressing the feeling of consumption picking up towards the year-end. Both durable and non-durables have done well," Bank of Baroda's chief economist Madan Sabnavis said in a research note. "This should be sustained as the rabi crop is expected to be good, and along with the wedding season should fuel spending in April and May."

But, he added, “negative growth in electronic products is a concern because there has been (productivity-linked incentive, or PLI) push too here. For the year there has been a fall of 11.4%."

Capital goods production, a proxy for fixed investments in the economy, grew 6.1% in March, lower than the 10% growth recorded in the corresponding month of the previous year. Growth in infrastructure and construction goods also slowed, to 6.9% from 7.2% in March last year.

Electricity generation, however, increased 8.6%, against a fall of 1.6% a year earlier.

Economy on the high road

As things stand, India remains the world’s fastest-growing major economy. The economy surged ahead in the December quarter, clocking 8.4% growth and belying fears of a slowdown as manufacturing, electricity and construction continued to fire on all cylinders.

High growth numbers led India's National Statistical Office to raise its GDP growth estimate for FY24 from 7.3% in its first forecast to 7.6% in its second. RBI’s economic growth estimate for FY24 is 7%.

The high growth registered by the consumer durables segment at 9.5% and capital goods at 6.1% indicates the expansion of investment trajectory in the country, said Sanjeev Agrawal, president, PHD Chamber of Commerce and Industry.

"We look forward to the growth trajectory of the Indian economy remaining on the high road in 2024-25," Agrawal said.

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