India’s factory output, based on the Index of Industrial Production (IIP), grew at a three-month high of 3.5% in October, due to a broad-based pick up in output of all the three sectors–manufacturing, mining, and electricity–amidst the festive season, official data released on Thursday showed.
The output of manufacturing and electricity grew by 4.1% and 2%, respectively, on a year-on-year basis in October. And that of mining grew marginally by 0.9%.
The growth rates of all the three sectors were the highest in three months, the data showed.
Analysts say that manufacturing growth was supported by festive demand, as output of electricals and electronics, apparels, food products, and other transport equipment improved. “At the same time, automobiles and machinery production contracted, possibly impacted by extremely high base, inventory build-up and muted demand conditions,” said HDFC Bank in a report. Overall, Overall, 18 of 23 manufacturing sub-segments recorded year-on-year growth, same as last month.
On a sequential basis, the IIP grew 2.2% in October, the fastest pace in five months. Mining’s output rose 15% on month; while manufacturing’s output inched up by 0.6%, and electricity’s by 0.6%.
At a use-base level, two of the seven categories–capital goods and consumer durables–recorded a slower growth, year-on-year, in October as against September. This was mainly due to the statistical effect of a high base.
Consumer durables output growth slowed to 5.9% in October from 6.5% in September, and capital goods output growth eased to 3.1% from 3.6%. Consumer non-durables growth, however, rose to 2.7% from 2.2%, and primary goods’ output growth increased to 2.6% from 1.8%.
“While the performance in the consumer durables segment has remained healthy in the year so far, the encouraging aspect is the improvement in output of consumer non-durables seen in the last two months. This reiterates the fact that there have been signs of continued improvement in rural demand,” said Rajani Sinha, chief economist, CareEdge Ratings.
Analysts say that healthy agricultural production is expected to be supportive for the consumption scenario going forward. However, there is a need to remain watchful of the trends in urban demand, especially considering some signs of slowdown, they say.
Additionally, in the coming months, the industrial sector activity is expected to improve further on the back of an expected pickup in government capex, say economists. A sustained increase in various high frequency indicators also points to the improvement in industrial output, said India Ratings and Research (Ind-Ra) in a report. Ind-Ra expects IIP growth to rise to 4.5% in November.