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* Industrial output accelerated to 5.2% YoY growth in Jan’23, led by electricity (+12.7% YoY) and mining (+8.8% YoY). Manufacturing, which was the weak link holding down real GDP growth in the previous two quarters, accelerated to 3.7% YoY growth in Jan’23, from average growth of 1.4% YoY in Jul-Dec’22. Manufacturing and industrial output are poised to accelerate further in the final two months of FY23, which should enable real GDP to grow slightly more than the 7% officially estimated for FY23.

* Primary goods (+9.6% YoY), capital goods (+11% YoY) and infrastructure/construction goods (+8.1% YoY) led the industrial acceleration in Jan’23. Mining, electricity and refined petroleum products (+5.1% YoY) were key contributors to the robust growth in primary goods. Consumer non-durables ended a 2-year slump, growing 7.6% YoY in Nov’22-Jan’23. But consumer durables declined 7.5% YoY in Jan’23, primarily because of the persistent weakness in textiles and apparel, which offset the strong rebound in motor-vehicle output (+12.9% YoY). The weakness in key labourintensive subsectors (also evident in decade-long near-stagnation in textile and garment exports) is worrying from a longer-term perspective, especially given their employment potential.

* Having endured a decade of near-stagnation, capital goods output grew 11% YoY in Jan’23 and 13.6% YoY in the first 10 months of FY23. Importantly, the level of capital goods output in Apr’22-Jan’23 was 3% higher than the pre-covid level in Apr’19- Jan’23. Capital goods imports also grew a healthy 7.4% YoY in Nov’22-Jan’23 (and were 22% higher than in the pre-covid period, Nov’19-Jan’20) — affirming the steady recovery in fixed investment spending. A sustained rebound in fixed investment is, in our view, the key factor that will enable India’s real GDP to grow 7.2% in FY24

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