IIP Output Grows At 5.8% In Sept, Slowest In Three Months
In September, the Index of Industrial Production (IIP) registered a notable deceleration in growth, reaching a three-month low of 5.8 per cent. As reported by the National Statistical Office (NSO), this is down from 10.3 per cent in August,
Specifically, the growth in manufacturing output slowed to 4.5 per cent, while the output in the electricity and mining sectors exhibited an acceleration, reaching 9.9 per cent and 11.5 per cent respectively, compared to the previous month. To provide context, it's worth noting that in September of the previous year, the IIP had recorded a growth rate of 3.3 per cent.
On a month-on-month basis, the index declined by 2.4 per cent. The Quick Estimates for September 2023 revealed that the IIP, with a base year of 2011-12, stood at 141.6. This figure is a reflection of the overall industrial production in the country. The IIP is divided into three sectors: mining, manufacturing, and electricity.
For September 2023, the indices for these sectors were 111.5, 140.6, and 205.9, respectively. These figures provide a more detailed picture of how each sector contributed to the overall IIP.
Aditi Nayar, Chief Economist, Head - Research and Outreach, ICRA, commented on the IIP data, "An unfavourable base, a shift in the festive calendar, and excess rainfall caused the year-on-year (YoY) growth in the Index of Industrial Production (IIP) to nearly halve to a lower-than-expected 5.8 per cent in September 2023 from 10.3 per cent in August 2023.”
The indices for consumer durables and consumer non-durables stood at 125.0 and 142.6, respectively. The growth in consumer durables and consumer non-durables, which reflect consumption and demand appetite in the economy before, fell to 1 per cent and 2.7 per cent respectively, from the last month period.
“While the moderation was broad-based across all sub-sectors and use-based categories, the performance of consumer goods was especially tepid at +1.0 per cent and +2.7 per cent, respectively, for durables and non-durables, resulting in the manufacturing sector's performance trailing that of mining and electricity in September 2023,” Nayar stated.
Furthermore, the IIP is classified into different categories based on the use of the products. In September 2023, the indices were as follows: 138.8 for primary goods, 111.6 for capital goods, 153.8 for intermediate goods, and 168.7 for infrastructure and construction goods.
Nine out of the 23 manufacturing sectors in the IIP, including those that deal with food items, tobacco, clothing, paper products, chemicals, computers, recorded media, and furniture, saw a decrease in output growth in September.
In the meantime, growth in primary and intermediate products in the use-based categories slowed from the previous month to 8 per cent and 5.8 per cent, respectively.
The capital and infrastructure goods, which indicate the advancement of capital creation, experienced a slight decline to 7.4 per cent and 7.5 per cent during the month, respectively, as a result of the negative influence of the southwest monsoon and a high base effect.
“Looking ahead, the YoY performance of a majority of the available high-frequency indicators improved in October 2023, relative to September 2023. Consequently, ICRA expects the YoY IIP growth to improve to 7 to 10 per cent in that month, boosted by a favourable base for some sectors owing to the early onset of the festive season in 2022 and the relatively fewer working days in October 2022. However, we expect fewer working days to dampen IIP growth in November 2023,” Nayar said, reflecting on future expectations.
IIP increased by 6 per cent in the first half of FY24 (April–September), compared to 7.1 per cent at the same time last year.
Nayar stated that the shift in the festive calendar is likely to muddy YoY comparisons for the next two months as well. “Consequently, it would be more meaningful to compare the average YoY growth performance in Oct-Nov 2023 vis-à-vis Oct-Nov 2022," she added.
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