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Mint Explainer: Why did India's industrial production fall in June?

Mint Explainer: Why did India's industrial production fall in June? Photo: Aniruddha Chowdhury/Mint
Mint Explainer: Why did India's industrial production fall in June? Photo: Aniruddha Chowdhury/Mint

Summary

India's industrial production growth fell to 3.7% in June due to weaker manufacturing growth. Projections were for 5.5% growth

NEW DELHI: India's industrial production growth dipped to 3.7% in June, from 5.3% in May. Mint explains why.

Why did the industrial production growth fall in June?

The growth fell during June primarily due to weaker manufacturing growth. Manufacturing growth, at 3.1%, brought down the overall growth rate after 14 of the 23 sectors in manufacturing registered negative growth. The significant non-performers were food, textile related and electronics among others.

What were the projections for June's industrial production growth?

The IIP growth was below the projections made by economists at Bank of Baroda, who pegged it at 5.5% during June. Analysts in a Reuters poll had forecast an expansion of 5%. Meanwhile, the industrial output for May was revised to 5.3% from 5.2%.

Going ahead, what's the outlook like for India's economy?

With the risks to global growth titled to the downside, economists expect weakness in external demand to persist. On the domestic front, a durable recovery in demand remains important for industrial activity, according to Care Ratings Ltd. Domestic demand also faces headwinds from the uptick in inflation fuelled by an acceleration in food prices. Weather-related uncertainties could also play a spoilsport for a recovery in rural demand.

What are the expectations for the industrial output growth in July?

The YoY (year-on-year) performance of most available high-frequency indicators such as petrol and diesel sales, generation of GST e-way bills, output of Coal India Limited, cargo traffic at major ports, rail freight traffic and electricity generation improved in July 2023 relative to June 2023, said Aditi Nayar, Chief Economist, at Icra Ltd. "In contrast, the YoY growth in vehicle registrations and finished steel consumption deteriorated in July 2023, relative to the previous month, while remaining in double digits. Based on these trends, ICRA expects the YoY IIP growth to witness an uptick to about 4-6% in July 2023," Nayar added.

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