Perspective on IIP data by Ms. Rajani Sinha, Chief Economist, CareEdge
Below the Perspective on IIP data by Ms. Rajani Sinha, Chief Economist, CareEdge
“India’s industrial production grew by a higher than expected 2.7% in April from an upwardly revised 3.9% in the previous month. Manufacturing sector growth held up relatively well at 3.4% supporting the overall IIP growth, while a contraction in the mining output and moderation in electricity output exerted downward pressures.
On the consumption front, while the output of consumer durable goods logged an encouraging growth, performance in consumer non-durables continued to disappoint, staying in the negative territory for the third month in a row. Going ahead, the domestic consumption landscape remains a key monitorable due to the prevailing unevenness in demand recovery. A favourable agricultural performance and expectations of a normal monsoon remain supportive of rural demand. However, a durable urban demand recovery is yet to be seen. Furthermore, the continued improvement in the inflation scenario led by easing of food inflation is a key tailwind for the demand recovery.
Among other components of IIP, a critical aspect to monitor is the performance in capex-related indicators. Capital goods output rose by a sharp 20.3% aided by a supportive base while infrastructure/construction output showed some moderation compared to the earlier months. Centre’s capex contracted by 4% during Jan-Feb FY25 following a pick-up in Q3. Given this weak momentum, the pace of capex revival remains a critical watch out going ahead.
Though the US has put the reciprocal tariffs on a 90-day hold, we expect global economic uncertainty to persist going forward. This is likely to weigh on both the private investment and consumption impulses. Nevertheless, expectations of a further rate cut by the RBI amid easing price pressures are expected to offer some support.”
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