According to National Statistical Office data, India’s factory output growth increased to an eight-month high of 7.1% in April, owing to a lower base. In April, electricity output surged by double digits (11.8%), while mining and manufacturing increased by 7.8% and 6.3%, respectively.
Except for consumer non-durables, all sectors grew at a rapid pace, according to use-based classification. Capital goods, which indicate investment demand in the economy, climbed 14.7% during the month, while consumer non-durables grew only 0.3%, indicating weak rural demand.
After six months of consecutive contraction, consumer durables (8.5%) experienced positive growth. According to the Chief Economist at Bank of Baroda Madan Sabnavis the IIP growth figure bolsters the confidence provided by the Purchasing Managers’ Indices and goods and services tax collections during this tough period.
We need to examine if this momentum can be maintained in the future, as it would be required for GDP growth to remain above 7% this year. Sustenance will be the mantra, as corporates finished the year on a high note in the fourth quarter. He believes that consumer demand and corporate investment will provide signals in the coming months.
Though the growth was aided by a somewhat favourable base, it reflected renewed traction in manufacturing, which moved up 6.3% in April from 1.9% in the previous month, showed the official data released on Friday.
Both mining and electricity segments, too, put up a decent show — the latter mainly due to a scorching summer. The overall IIP was also up 6.8% from the pre-pandemic period (April 2019).
Given the favourable base in the wake of Covid-related curbs during the second wave, industrial output in May will likely record a double-digit expansion, though a rise in the interest rate can potentially weigh on the momentum, analysts said.
In signs that both investments and urban consumption are somewhat recovering, growth in capital goods and consumer durables scaled eight-month peaks of 14.7% and 8.5%, respectively.
