IIP growth falls to 5-month low of 1.1% in March on poor manufacturing performance

Economists surveyed by Moneycontrol expected IIP growth to cool to 3.2% in March.

India's industrial output grew by 1.1 percent in March - the slowest pace in five months - data released by the Ministry of Statistics and Programme Implementation on May 12 showed.

Industrial growth, as per the Index of Industrial Production (IIP), for February has been revised up to 5.8 percent from 5.6 percent.

At 1.1 percent, the March IIP growth figure is well below the consensus estimate of 3.2 percent.

For 2022-23 as a whole, industrial production clocked a growth of 5.1 percent as against 11.4 percent in 2021-22.

The sharp fall in industrial growth in March was due to the manufacturing and electricity segments stagnating.

In March, output of the manufacturing sector - which accounts for more than three-fourth of the IIP - rose by a mere 0.5 percent on a year-on-year basis as against a 5.6 percent increase in February. To make matters worse, electricity production was down 1.6 percent compared to an 8.2 percent rise in February.

However, on a sequential basis, manufacturing output was up 6.4 percent from February, while electricity production was 8.0 percent higher.

The third sector, mining, saw its output rise by 6.8 percent year-on-year and 19.3 percent on a month-on-month basis.

Going by the use-based classification of goods, five of the six categories posted weaker numbers in March.

Growth in primary goods' output more than halved to 3.3 percent from 6.9 percent in February, while capital goods saw their production rise by a respectable 8.1 percent in March - albeit lower than the 10.5 percent growth they had posted in February.

Production of infrastructure goods was up 5.4 percent compared to 8.4 percent in February.

But the worst showing came from the cosumer goods, with output of both durables and non-durables contracting in March by 8.4 percent and 3.1 percent, respectively.

In February, production of consumer durables had fallen by 4.1 percent, while that of non-durables had surged 12.1 percent.

Only intermediate goods showed any improvement in performance, with their output increasing by 1 percent, marginally higher than 0.7 percent in February.

The poor industrial performance in March is much worse than what was expected, with the most pessimistic estimate in Moneycontrol's survey being a 2.0 percent growth. However, the actual number coming just over half that figure will be of concern to policymakers and could be a sign of things to come, with GDP data for January-March set to be released on May 31.