India's factory output expands at 7.5 percent in January

Riding on the back of robust manufacturing sector output, India’s industrial production sustained the growth momentum to rise 7.5 percent in January, indicating early signs of industrial revival.

Factory output grew at 7.1 percent in December, before hitting a 25-month high of 8.4 percent in November, last year, as compared with a modest growth of 3.5 percent during December, 2016.

Factory output measured by the index of industrial production (IIP) is the closest approximation for measuring economic activity in the country’s business landscape.

Cumulative IIP growth for the period of April-January over the corresponding period of the previous year stands at 4.1 percent.

Manufacturing sector, which accounts for more than three-fourths of the entire index soared 8.7 percent in January as compared with 8.5 percent in December, led by an improved production of consumer durables and continued double-digit growth of consumer non-durables as well as capital goods.

According to Devendra Pant, Chief Economist at India Ratings, robust growth of consumption-related sectors will provide stability of Gross Domestic Product (GDP) growth in the next financial year as private final consumption expenditure (PFCE) is the biggest component while calculating GDP.

​ Capital goods output, which is a proxy to measure private sector investment activity, was 14.6 percent in January compared to 16.4 percent in December.

Consumer durables output escalated at 8 percent in January as compared with a meagre 0.9 percent rise in December, 2017, while consumer non-durables grew 10.5 percent in January from 16.5 percent jump a month ago.

The sequential improvement in IIP growth in January 2018 was chiefly driven by consumer durables and primary goods led by components such as two-wheelers and electricity, respectively, Aditi Nayar, Principal Economist at ICRA said.

“While an unfavourable base effect weighed upon the expansion of consumer non durables, it nevertheless remained in double-digits in January 2018, benefiting from the high growth in sugar, digestive enzymes and antacids, and steroids and hormonal preparations, which have a combined weight of 1.7 percent in the IIP,” Nayar said.

Electricity production showed an improvement, rising 7.6 percent in January, as compared 4.4 percent growth in December and 5.1 percent a year ago.

Mining activity’s growth further plummeted, growing 0.1 percent in January following December’s trend at 1.2 percent, as compared with a robust growth of nearly 8.6 percent a year ago.