Industrial production grows 5.1% in May
New Delhi, June 30 -- India's industrial output gained between April and May, but a granular reading of the data showed the impact of the West Asia crisis in parts of industry, especially in gas supply and the moderation in manufacturing growth from April levels. The Index of Industrial Production (IIP) grew 5.1% year-on-year in May, up from 4.9% in April and 3% in March. This is a modest 0.7 percentage points higher than the 4.4% pre-war print in February.
The sector-wise trajectory shows the uneven nature of the recovery. Manufacturing, which carries the highest weight in the index at 76.1%, grew 5.7% in February, slowed to 4% in March, rebounded to 6.1% in April, and moderated to 5.5% in May. Electricity and gas supply rose from 1.9% in February to 9.9% in May, but this headline improvement masks weakness in gas supply, which contracted more than 7%. Mining and quarrying remained in contraction through the period, moving from -2.4% in February to -2.6% in March, -3.8% in April and -1.6% in May.
Within manufacturing, 16 of the 23 industry groups recorded positive growth in May. The major contributors were the manufacture of motor vehicles, trailers and semi-trailers (up 14.5%), electrical equipment (20.8%), and basic metals (4.6%).
On the use-based side, capital goods remained the strongest category, growing 12.9% in May, while consumer durables and non-durables improved to 7.2% and 3.6%, respectively, from 4.2% and 1.6% in February.
"On the use-based side, the uptick in consumer goods production, both durable and non-durable goods, is a positive signal. However, the durability of recovery in consumption needs monitoring amid ongoing geopolitical volatility, inflationary pressures, and slow progress of the monsoon," said Rajani Sinha, chief economist, CareEdge Ratings. With this release, the Ministry of Statistics and Programme Implementation (MoSPI) has discontinued the use of WPI and adopted Output PPI as the deflator for item groups where production is collected in value terms. This affects 234 of the 463 item groups in the IIP basket, representing 36.02% of the total index. MoSPI has now revised and released the entire IIP 2022-23 series using Output PPI, superseding WPI-based IIP 2022-23 series released on June 1. The ministry said Output PPI provides a more granular price structure than WPI and would improve the estimation of real output for value-based items.
It also said the shift is in line with international best practices and the recommendation of the Technical Advisory Committee on the base revision of IIP....
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