India's factory output grows sharply at 4.3% in August
Manufacturing sector, which accounts for more than three-fourth of the entire index, continued to growth at 3.1 percent in August.
India’s industrial output grew sharply 4.3 percent in August, highest in nine months, showing signs of recovery, aided by an expansion in the manufacturing sector.
The government today revised July’s factory output growth to 0.9 percent in July, as compared with an earlier estimate of 1.2 percent.
The recovery in industrial output is a clear indication that the companies have begun restocking and building fresh inventories after clearing up the stockpile in June ahead of the Goods and Services Tax’s (GST’s) roll out from July 1.
Factory output measured by the index of industrial production (IIP) is the closest approximation for measuring economic activity in the country’s business landscape.
Manufacturing sector, which accounts for more than three-fourth of the entire index, continued to growth at 3.1 percent in August, compared with 0.1 percent growth in July, government data showed.
Capital goods output, which is reflective of the private sector investment scenario, rose 5.4 percent in August compared with (-) 0.1 percent contraction in July.
Mining production showed a substantial jump of 9.4 percent in August from 4.8 percent in July.
Electricity production increased 8.3 percent in August as compared with 2.1 percent a year ago.
Primary goods’ production grew sharply at 7.1 percent in August as compared with 2.3 percent jump last month. Similarly, consumer non-durables grew nearly 7 percent, which contracted (-) 0.1 percent in July.
"While the positive surprise provided by the IIP suggests that many of the organised sectors have traversed the GST transition, their performance may not be mirrored by the informal sectors," said Aditi Nayar, Principal Economist, ICRA.
"On a cautious note, this uptick in industrial growth may not sustain in September 2017, with the early indicators for industrial production in the organised sectors, namely, automobiles, coal and electricity generation, revealing some moderation in the pace of expansion from the spikes recorded in August 2017," Nayyar said.
"In our view, while the impact of post-GST restocking may have started to fade, inventory building prior to the festive season is likely to have bolstered manufacturing growth in the just-concluded month. Nevertheless, given the somewhat unfavourable base effect, we expect the IIP growth to ease in September 2017 relative to print of 5.0 percent in September 2016," she added.