IIP growth slows to 2.4 per cent in July | The Financial Express

IIP growth slows to 2.4 per cent in July

On a seasonally-adjusted basis, industrial output contracted by 0.75% month-on-month, against -0.35% in the previous month, according to India Ratings.

IIP growth slows to 2.4 per cent in July
Manufacturing growth slowed to 3.2% in July from 13% in the previous month. (Representational image)

Growth in the index of industrial production (IIP) hit a four-month low of 2.4% in July from a year before, compared with 12.7% in the previous month, as a normalisation of a favourable base effect, slowing export demand and heavy monsoon downpour in select regions hit output. Although the index of industrial production (IIP) still exceeded the pre-pandemic level (same month in 2019) by 2.1% in July, it dropped 2.7% on a month-on-month basis. More importantly, the sequential slowdown remained broad-based across mining, manufacturing and electricity. On a seasonally-adjusted basis, industrial output contracted by 0.75% month-on-month, against -0.35% in the previous month, according to India Ratings. However, this remained at odds with the PMI for the manufacturing sector, which remained firmly in the expansionary zone in July, with a reading of 56.4.

Crisil chief economist DK Joshi said the impact of slowing global growth is beginning to be felt by domestic manufacturing. “Key export sectors such as textiles, petroleum products, machinery and equipment saw sequential fall in the IIP in July. This could gain pace over the next 12 months, as aggressive monetary tightening and elevated inflation hit demand prospects in major advanced economies,” Joshi said.

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Local demand didn’t seem to have lent support to manufacturing either, he added. Importantly, growth in consumer durables plunged to 2.4% in July from 25.1% in the previous month. Consumer non-durables output, in fact, shrank 2% in August, against an increase of 3% in the previous month. These suggest some shifting of demand from goods to services and persistent weakness in rural consumption. Capital goods output growth, too, slowed dramatically to 5.8% from 29.1%.
According to Aditi Nayar, chief economist at Icra, a shift in discretionary consumption to contact-intensive services, too, weighed down the IIP growth in July, in addition to factors like a normalising base and heavy rainfall.

Also read| IIP logs decent growth over pre-Covid level

She expected an improvement in the IIP growth to about 4-6% in August from a year before. Manufacturing growth slowed to 3.2% in July from 13% in the previous month. The electricity sector grew 2.4%, against 12.7% in the previous month. Mining, in fact, shrank by 3.3% in July, the first contraction after a gap of 16 months, even though coal output jumped by 11.4%. This is mainly due to heavy rainfall in select regions.

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