The robust rise in industrial production will be aided by cement and steel production and rise in capital goods imports. If the IIP comes in at 10%, it will be the highest print in 14 months.
With the eight core industries’ output having grown at a 14-month high of 12.1% in August, and other high frequency indicators showing upbeat performance, economists anticipate the Index of Industrial Production (IIP) growth in the month to come in at around 10%.
The robust rise in industrial production will be aided by cement and steel production and rise in capital goods imports. If the IIP comes in at 10%, it will be the highest print in 14 months.
Also, the IIP in August will be aided by the statistical effect of a low base. IIP will rise just 1.9% month-on-month. In August 2022, the IIP had shrunk 0.7% on year.
The National Statistical Office will release the IIP data for August on October 12.
The core sector, which consists of eight industries–coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity–form about 40% of the IIP.
In August, the robust performance of the core sector growth was primarily driven by a sharp rise in production of electricity and coal, which was caused as a result of a deficient monsoon leading to spike in power consumption. The output of both the sectors soared 14.9% and 17.9%, respectively, on a year-on-year basis during the month.
India’s power consumption in August had risen 16% year-on-year to 151.66 billion units (BU).
The output of steel and cement also rose sharply by 10.9% and 18.9% in August, reflecting a sustained support from the government’s capital expenditure.
India Ratings and Research (Ind-Ra) in a note said that the core sector output’s growth in August was much higher than its expectations of 7%. “The support to the core sector data in August was fairly broad-based as all segments witnessed a positive y-o-y growth for the second consecutive month,” it said.
Meanwhile, other high frequency indicators, such as E-way bill generations and passenger vehicles sales indicate buoyancy in economic activity which would push the IIP in August.
“Factoring the upbeat core sector growth along with positive performance seen in other high-frequency indicators (GST collections, E-way bills, PV sales and power consumption), we see IIP growth in the range of 8.5-10% in August,” said Rajani Sinha, chief economist, CareEdge.
E-way bill generation in August had risen to a record high of 93.44 million, which was 19.5% higher on year. And GST collections during the month had grown 11% to Rs 1.59 trillion.
Passenger vehicles sales in August had soared 11.6% to 313,715 units on year.
ICRA’s Chief Economist Aditi Nayar has projected IIP to grow between 9 to 11% in August.
In July, the IIP had grown 5.7%, at the highest pace in 5 months.
“Going ahead, the upcoming festive season could provide the much-needed boost to the consumption scenario in the economy. The government’s sustained thrust on capex-push will continue to support the performance of infrastructure and construction sectors. However, we remain cautious on the external front with performance in export-intensive sectors likely to remain muted,” said Sinha.
Source:financialexpress.com