India's industrial growth shrinks to 12.3% in June as favourable base effect fades

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India's industrial growth, as per the Index of Industrial Production (IIP), fell to 12.3 percent in June against 19.6 percent in May, the Ministry of Statistics and Programme Implementation showed.

The June industrial growth figure is above the consensus estimate. A Moneycontrol poll of 15 economists had predicted IIP growth would fall to 10.6 percent in June.

IIP growth in June 2021 was 13.8 percent.

Industrial growth prints in both May 2022 and June 2021 were high thanks to favourable base effects.

In June 2021, IIP growth was high on account of economic activity coming to a halt in the comparative period of June 2020 because of the nationwide lockdown imposed to curb the spread of the coronavirus pandemic.

Meanwhile, May 2022 saw industrial growth surge to the highest in one year as the year-ago month saw India being engulfed by the second wave of the pandemic, which led to the reimposition of curbs on activity and movement in several parts of the country.

In June, all three sectors - mining, manufacturing, and electricity - posted significant drops in their growth rates.

The story was similar when looking at the use-based classification, except in the case of consumer non-durables, where production was up 2.9 percent year-on-year compared to a growth of 1 percent in May.

The higher growth in consumer non-durables in June is particularly appreciable as it was not due to a favourable base effect. At 2.9 percent, the growth in production of consumer non-durables is the highest in five months and the second-highest in 10 months.

IIP data for July, which will be released on September 12, is expected to show a further drop in industrial growth.