IIP growth rises to a six-month high of 5.2% in November

Industrial production for November

India’s industrial growth rose to a six-month high of 5.2 percent in November, compared to 3.7 percent in the previous month, data released on January 10 showed, as the economy showed some signs of recovery after a disappointing second quarter.

"Quite clearly the needle appears to have turned during the festival season which is a good sign," said Madan Sabnavis, chief economist, Bank of Baroda.

November marks the third consecutive month of rise in industrial output and follows a strong performance in the core sector, as all three major industries recorded a pick up in growth.

India’s core sector output had expanded to a four-month high of 4.3 percent in November compared with 3.7 percent in the previous month, with four of the eight sectors exhibiting better performance than the previous month.

Manufacturing, which accounts for over three-fourths of the index, rose to an eight month high of 5.8 percent in November compared with 4.4 percent in the previous month, while mining rose 1.9 percent from 0.9 percent in October. Electricity sector growth also doubled to 4.4 percent from 2 percent in the previous month.

Economists indicate that a low base also contributed to better performance.

"A combination of a favourable base effect (November 2023: 2.5 percent) and the greater momentum in the manufacturing sector which recorded a growth of 5.8 percent in November 2024 (at an eight-month high) pushed the industrial sector growth to a six-month high," said Paras Jasrai, senior analyst, India Ratings and Research.

Sequentially, industrial production was down 1.2 percent.

Among the use-based industries, five of six indicated a better showing in November as government spending picked up pace in the month.

"Data indicates a pickup in investment and construction sector activity. The infrastructure goods output grew at a 13-month high of 10 percent in November 2024 as the government spending picked up further pace. The output of capital goods also increased at a four-month high of 9.0 percent in November 2024," said Jasrai.

Consumer durables was the fastest growing segment recording a double digit growth of 13.1 percent over contraction from the previous year, however, non-durables growth slipped to a three-month low of 0.6 percent from 2.6 percent in the previous month.

Aditi Nayar, chief economist, ICRA, points that the festive season growth was modest.

"Given the base effects related to the shifting festive dates, an average growth over October-November tends to provide a better gauge of the underlying momentum. By this yardstick, overall industrial growth was modest at 4.4 percent, driven by consumer durables (9.2 percent) and infra/construction goods (7.3 percent), with a distinctly lacklustre performance of primary goods (2.6 percent) and consumer non-durables (1.5 percent)," Nayar said.

India's manufacturing growth at 5.3 percent is likely to be nearly half of 9.9 percent growth witnessed previous year, as per first advance estimates released on January 7.

Outlook

The performance in December is likely to be subdued with growth settling below 4 percent, say economists.

"ICRA expects the IIP growth to moderate to ~3-5% in December 2024 (+4.4% in December 2023) from 5.2% in November 2024 (+2.5% in November 2023), partly on account of an unfavorable base," Nayar said.