India's industrial production grows to 1.7% in February as core sectors look up

India's industrial growth, as per the Index of Industrial Production (IIP), edged up to 1.7 percent in February from 1.5 percent in January, data released on April 12 by the Ministry of Statistics and Programme Implementation showed.

Industrial growth was expected to rise in February, with data released late March showing that the output of India's eight core sectors increased by 5.8 percent year-on-year in February, up from 4 percent the previous month.

With the eight core industries accounting for 40.3 percent of the total weight of IIP, industrial growth tends to rise when the performance of these sectors improves.

Though industrial output increased at a greater rate in February than in January, the rate of expansion remains subdued. The manufacturing sector, which makes up over three-fourths of the IIP, grew by a mere 0.8 percent in February, down from 1.3 percent in the first month of 2022.

However, mining and electricity saw an appreciable improvement. While mining output rose 4.5 percent year-on-year in February, up from 2.8 percent in January, that of electricity was also up by 4.5 percent. In January, electricity production was up a mere 0.9 percent.

The picture was equally mixed as per the use-based classification, with half the categories witnessing an improvement in output growth, while the other half saw deterioration.

In February, the output of primary goods, intermediate goods, and infrastructure goods grew at a faster clip than it did in January.

Growth in capital goods output, however, slowed to 1.1 percent on a year-on-year basis from 1.4 percent in January, while consumer durables and non-durables witnessed a contraction compared to the same month last year.

The decline in capital goods output growth may be a matter of concern as a Reserve Bank of India survey, released on April 8, showed capacity utilisation in the manufacturing sector rose to a two-and-a-half-year high of 72.4 in the last quarter of 2021.

A capacity utilisation rate of above 75 is regarded as the level that must be crossed for companies to start investing in greater capacity. However, production of capital goods has risen by less than 1.5 percent in each of the first two months of 2022.

Capital goods production contracted by 2.7 percent on average in October-December 2021.

For April 2021-February 2022, industrial output saw a growth of 12.5 percent as against a contraction of 11.1 percent in the corresponding period of FY21.