IIP growth edges up to 5.2% in January from 4.7% in December

The performance of the core sectors is a leading indicator of industrial growth as the eight core industries make up around 40 percent of the IIP.

The higher IIP growth rate in January was down to better production numbers in two of three sectors.

While manufacturing output rose by 3.7 percent, up from 3.1 percent in December, electricity production was higher by 12.7 percent as against an increase of 10.4 percent in the last month of 2022.

However, mining sector output increased by 8.8 percent, down from 10 percent growth recorded in December.

Going by the use-based classification of goods, two of the six categories - namely primary and capital goods - posted higher production growth rates in January compared to December, while those for infrastructure and consumer non-durables edged lower.

Output of primary and capital goods rose by 9.6 percent and 11 percent in January, up from 8.4 percent and 7.8 percent the previous month, respectively.

Production of infrastructure and consumer non-durable goods, meanwhile, increased by 8.1 percent and 6.2 percent, respectively. In December, they had increased by 9.1 percent and 7.6 percent.

However, output of consumer durables continued to shrink (7.5 percent contraction in January versus 11 percent contraction in December), while intermediate goods saw a marginal 0.1 percent increase in their production.

"A portion of the continuing, albeit narrower contraction in consumer durables stems from weak exports," noted Aditi Nayar, chief economist at ICRA.

"Despite the subdued base related to the third wave of Covid-19, some of the available high frequency indicators recorded a weaker year-on-year performance in February, relative to January, such as Coal India Limited's output, rail freight traffic, ports cargo traffic, electricity generation and auto output. In contrast, vehicle registrations and finished steel consumption witnessed an improved year-on-year performance in February, relative to the previous month. Based on these trends, we expect the IIP to record a dip in growth to 3-5 percent in February," Nayar added.