Industrial growth in October picks up to 3.5%, a three-month high

Industrial production for October

Festive season push helped India’s industrial growth to a three-month high of 3.5 percent in October, compared to 3.1 percent in the previous month, data released on December 12 showed.

October marks the second consecutive month of rise in industrial output, after a slight contraction in August. The reading was a tad below a Moneycontrol poll of 15 economists, which predicted growth to rise to 3.6 percent.

"As expected, IIP grew by 3.5 percent in October from last month’s 3.1 percent, driven by a broad-based improvement across the mining, manufacturing and electricity sectors," said Rajani Sinha, chief economist, CareEdge.

Of the three major industries, mining rose 0.9 percent, while manufacturing expanded 4.1 percent compared with 3.9 percent in the previous month, while electricity growth remained muted at 2 percent.

The performance of the core sector industries, which constitute 40 percent of the Index of Industrial Production, was also better in October. India’s core sector output had expanded 3.1 percent in October as compared to a revised 2.4 percent in September, as four of the eight sectors recorded a faster pace of growth.

Consumer segments show promise

On the use-based classification, four of the six major groups showed a faster pace of growth.

While capital goods growth eased to 3.1 percent in October from 3.6 percent in the previous month, consumer non-durables, infrastructure, intermediate and primary goods rose faster.

"The improvement in growth of consumer goods output (boosted by festive demand) despite high inflation in October 2024 (6.2%) is quite encouraging and a positive sign for consumption demand in the economy," said Paras Jasrai, senior analyst, India Ratings and Research.

Consumer non-durable growth picked up to 2.7 percent from 2.2 percent in the previous month, even as there was a slight slowdown in durables industry to 5.9 percent from 6.5 percent earlier.

"Healthy agricultural production is expected to be supportive for the consumption scenario going forward. However, we need to remain watchful of the trends in urban demand, especially considering some signs of slowdown," said Sinha from CareEdge.

Sequentially, growth was up 2.2 percent in November from the previous month.

Signs of revival

Manufacturing activity has remained subdued in the first half of the year, especially in the second quarter. But the government is hopeful of a pickup in the third quarter.

India's economy slowed drastically to 5.4 percent in the second quarter of the year, as industrial and mining activity slowed in July-September period.

Mining contracted for the first time in two years, while manufacturing took a hit with growth stumbling to 2.2 percent in Q2FY25 from 7 percent from in the previous quarter.

Experts indicate that industrial production is likely to see an uptick from November, as higher public capex provides support.

"Going forward, the industrial sector activity is expected to improve further on the back of an expected pickup in government capex. A sustained increase in various high frequency indicators also points to the improvement in industrial output," Jasrai noted.

Ind-Ra expects the IIP growth to rise further to 4.5 percent in November 2024.

Rating agency ICRA noted that a favourable base may accelerate November growth to 5-7 percent.

Growth had fallen to 2.5 percent in November 2023 compared with 11.9 percent in October 2023.