India’s industrial output growth slowed to a nine-month low in May to 1.2% on year, dragged down by dismal manufacturing and contraction in electricity generation and mining.
The manufacturing sector that has a weight of 77.6% in the Index of Industrial Production saw its growth slowing to 2.6% in May from a revised 3.1% in April.
The electricity sector contracted 5.8% on year in May from a growth of 1.7% in April while the mining sector output was down 0.1%.
“The early onset of monsoon doused the activity in mining and demand for electricity,” chief economist at ICRA Aditi Nayar said.
Within the manufacturing sector the output of electronics (-3.4%), pharma (-3.1%), textiles (-2.7%), leather (-4.9%), beverages (-4.0%) and chemicals (-4.8%) contracted when compared to last year.
“Only 11 sub-sectors out of the total 23 had a higher year-on-year growth then the overall growth in May, illustrating fractured and paltry industrial growth,” associate director at India Ratings paras Jasrai said.
The support for manufacturing came from the auto sector (6.3%), other transport equipment (6.3%, machinery (11.8%),electrical equipment (7.6%), metals (6.4%) and plastics (10%).
As per the use based classification, the capital goods sector performed the best with a growth of 14.1% in May from 14% in April. The growth in the capital goods sector was at a 19-month high. Intermediate goods growth was 3.5% in May down from 4.9% in April.
Infrastructure and construction goods that have been consistently performing better than others grew 6.3% in May up from 4.7% in April.
“The Centre’s capital expenditure gained momentum towards the end of FY25 and has maintained an encouraging trend in the first two months of the current fiscal. This bodes well for the investment scenario in the economy. However, private capex remains subdued, with global economic uncertainty further dampening the investment sentiments,” chief economist at CareEdge Ratings Rajani Sinha said.
The consumer durable sector saw a steep decline in May. In May the contraction in the sector was -0.7% from 6.2% expansion in April. The consumer non-durable sector saw an output decline of -2.4% in May, a little better than -2.7% in April. The primary goods sector with the highest weight was down -1.9% during the month from -0.,2% in April.
From the consumption perspective, weakness in output of consumer non-durable goods has persisted.
“Several factors such as easing food inflation, policy rate cuts and favourable prospects for monsoon are playing out positively for the consumption scenario. These should aid in strengthening the overall demand in the economy. Demand recovery in both the urban and rural segments remains critical,” Sinha added.