The Index of Industrial Production (IIP) had grown 4% in June last year.
Data released by the Ministry of Statistics and Programme Implementation showed that the growth of manufacturing, which comprises two-thirds of the index, almost halved to a seven month low of 2.6% in June from 5% in May. Electricity and mining grew 8.6% and 10.3% on-year, respectively in June.
Overall, IIP growth in the first quarter of FY25 was 5.2%, higher than 4.7% registered a year ago.
Consumer durables grew 8.6% on-year due to a favourable base effect while consumer non-durable goods, contracted 1.4% indicating the stress in rural demand hasn’t bottomed out yet. “The latest data points to the consumption demand still being led by the upper income households. The sustained divergence in the consumer goods segments is a concern …This is not allowing the consumption demand to get broad-based,” said Paras Jasrai, senior economic analyst, India Ratings and Research.
Capital goods grew at a meagre 2.4% yoy (lowest since February 2024) in June 2024, signaling muted investment activity in the economy. Even the growth in infrastructure goods declined to a seven-month low of 4.4% yoy in June 2024 due to drop in government capex.
“Growth slowed across most labour- and capital-intensive sectors. Infra and construction goods industrial production continued to slow, driven by lower government capex in the quarter,” said Shreya Sodhani, Regional Economist, Barclays.
Only seven out of 23 industries witnessed a higher growth than the overall industrial output growth in June 2024 (lowest since January 2024) indicative of the weakness in the manufacturing sector.
“The impact of general elections was visible in IIP data…Below-par manufacturing growth is worrisome for stability of industrial recovery,” Jasrai added.
IIP growth is expected to ease to 2.5-4.5% in July. “With a slowdown in government capex amidst the elections and lacklustre rural demand as well, we anticipate a moderation in the GDP growth print for the first quarter of FY25,” said Aditi Nayar, chief economist at ICRA.