NEW DELHI: After showing some signs of improvement, India’s industrial production growth slipped to an eight-month low of 3.2% in October, a festive month when the output should have been better. Performance of the eight core industries was muted by the poor show of the manufacturing sector.
According to the data released by the National Statistical Office on Friday, the manufacturing sector, which constitutes 77.63% of the Index of Industrial Production (IIP), grew at a tepid 2.04% in October. Mining activity grew 11.4%, while power generation rose 3.1%. The IIP had grown by 4.5% in October 2020.
Capital and consumer goods, which indicate revival in demand, also presented a bleak picture. Capital goods output dropped 1.1% in October compared with a 2.4% growth in September. Despite being the festive month, consumer durables contracted 6.1% against 18.1% growth in October 2020.
Consumer non-durables (fast moving consumer goods), grew just 0.5% in October, against 7.3% growth a year ago.Experts say the trend during the festive month shows recovery is not sustainable and that IIP growth is likely to remain sluggish in the near future.
“The disaggregated data does not provide convincing signals of the recovery becoming durable and broad-basing further, with capital goods and consumer durables reporting a YoY contraction in October 2021,” said ICRA chief economist Aditi Nayar.
Indian economy grew 8.4% in the second quarter of FY22. Many rating agencies have already cut the country’s growth forecast. On Friday, Japanese brokerage Nomura said the current growth cycle being witnessed in India is not durable and will peak by the first half of 2022. It said the recovery has been uneven, hurting consumption of lower-income households, and a sustained capital expenditure cycle is also not in sight.
“Overall, we do not see the current growth cycle as durable. With mixed growth, high inflation and wider twin deficits, we expect India’s risk premium to rise and the RBI to catch up as it falls behind the curve,” its analysts said, citing low vaccination drive and stretched government finances.
