New Delhi : The Index of Industrial Production (IIP) grew 4.3% on a year on year basis in December 2022, losing momentum compared to the 7.3% growth in November 2022, according to data released by the National Statistical Office (NSO) on February 10. The manufacturing driven slowdown in IIP growth between November and December suggests that the dissipation of festive/pent-up demand could have played a role in industrial activity losing momentum, even as capital and infrastructure spending continue to support growth.
IIP tracks activity in manufacturing, mining and electricity generation, although the first has a share of over three fourth in the index. A sector-wise disaggregation of the index shows that the latest loss of momentum is mainly due to manufacturing, which grew at 2.7% in December 2022 compared to 6.4% in November 2022. The mining and electricity sub-components of the index grew at 9.8% and 10.4% in December 2022. The respective values were 9.8% and 12.7% in November 2022.
A use-based classification of the index corroborates the loss of festive/pent-up demand. The consumer goods sub-category, which grew at 7.6% in November 2022, posted a growth of just 0.4% in December 2022, with the loss of momentum mainly on account of consumer durables which contracted by 10.5% in December 2022. Even capital and infrastructure/construction goods sub-categories lost momentum between November and December with respective growth coming down from 21.6% to 7.6% and 13.2% to 8.2%.
“The data suggest that India’s manufacturing sector is still stronger than those seen in the rest of Asia, though a very gradual slowdown may start to be visible”, Rahul Bajoria, MD and Head of EM Asia (ex-China) Economics, Barclays, said. “Of note was the sharp 10.4% contraction in consumer durables, partly driven by a high base, but also a sequential slowdown. On the other hand, growth in capital goods, and infrastructure and construction activity slowed given the material pickup in November, but remain robust, signaling the resilience of infrastructure,” Bajoria added.
The latest IIP data is in contrast to the trend seen in Purchasing Managers’ Index (PMI) manufacturing which rose from 55.7 to 57.8 between November and December 2022. To be sure, the January PMI manufacturing does show a moderation to 55.4.