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Below the Perspective on the IIP Data by Ms. Rajani Sinha, Chief Economist, CareEdge Ratings

“Growth in India’s industrial production came at a fourteen-month low of 0.4% in October. Moderation in the manufacturing sector growth along with de-growth in mining as well as electricity sector weighed on the overall IIP growth. While the weaker print can be partly attributed to fewer working days due to multiple festivals, the softness in momentum remains a key monitorable in the coming months.

On the investment side, infrastructure and construction goods continued to post healthy expansion (7.1% Vs 10.6%), supported by strong capex at the Central as well as state government level. Additionally, our analysis of order books for a sample of capital goods companies points towards a favourable capex outlook. However, the ongoing global uncertainties are likely to remain the key headwinds.

Demand-side indicators also softened, as both consumer durables and non-durables saw a contraction in output. Going ahead, the consumption trends in the economy continue to remain a critical monitorable.  Several factors such as reductions in the income tax rate, GST rate rationalisation, and the easing inflationary pressures have boded well for consumption. While rural demand conditions remain steady, a broad-based momentum in the domestic demand scenario remains critical for supporting IIP momentum going forward. Apart from domestic demand, it will be crucial to monitor external headwinds which can weigh in on the industrial production”.

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