IIP growth rises to 5.2% in May

The Index of Industrial Production, or IIP, is a key indicator of India’s monthly activity levels.

India's industrial output grew by 5.2 percent in May, according to data released by the Ministry of Statistics and Programme Implementation on July 12.

At 5.2 percent, the latest industrial growth figure as per the Index of Industrial Production (IIP) is above the consensus estimate of 5 percent. It is also at a three-month high.

Industrial growth had come in at 4.2 percent in April - now revised to 4.5 percent - and was 19.7 percent in May 2022.

Industrial growth was expected to rise in May, with all but one of the 15 economists surveyed by Moneycontrol predicting production would grow at a faster clip than it did in April.

Mining was the best-performing sector in May, with its output rising 6.4 percent on a year-on-year basis. However, the manufacturing sector also picked up pace, with its production growing by 5.7 percent as against 5.2 percent in April.

The output of the manufacturing sector accounts for more than three-fourths of the IIP.

Electricity generation, meanwhile, increased after falling in March and April, registering a rise of 0.9 percent.

Going by the use-based classification of goods, the performance was mixed, with two of the six categories - infrastructure and consumer non-durables - posting weaker growth numbers in May. However, May is the first time in six months that the output of all six goods increased on a year-on-year basis, with the production of consumer durables rising for the first time since November 2022.

The continued decline in the output of consumer durables over the last few months had been cited by economists as an indication of weakness in discretionary spending. In May, the output of this category of goods was up 1.1 percent.

"It will be critical for the consumer goods revival to sustain," noted Rajani Sinha, chief economist at CareEdge.

"If the rise in food inflation persists, it could have an adverse impact on consumption revival. It will also be important to watch out for the progress of monsoon, as any weather-related disruption could topple the rural demand recovery," Sinha added.

Headline retail inflation rose more than expected to 4.81 percent in June, spurred on by a sharp up-tick in food inflation to 4.49 percent from 2.96 percent in May.