The year-on-year growth rate of the manufacturing sector plunged from 9.3% in August to 4.5% in September, and that of electricity declined from 15.3% to 9.9%.
The growth in the Index of Industrial Production (IIP) fell sharply to a three-month low of 5.8% in September from a 14-month high of 10.8% in August, mainly on account of a sharp fall in output growth of manufacturing, data released by the National Statistical Office showed on Friday.
The year-on-year growth rate of the manufacturing sector plunged from 9.3% in August to 4.5% in September, and that of electricity declined from 15.3% to 9.9%. Mining sector’s growth, too, eased from 12.3% in August to 11.5% in September.
On a month-on-month basis, factory output declined 2.4% in September, the second sharpest sequential decline in the current series which started in 2012. Typically, IIP grows sequentially in September, but a fall was on account of a month-on-month contraction in manufacturing activity. In September, manufacturing output declined 2% sequentially, the sharpest pace since 2012.
The unusual decline in manufacturing activity was due to a sequential contraction in output of food products, petroleum products, pharmaceuticals, non-metallic mineral products, chemical products, and basic metals. Collectively, these six items comprise 60% of the IIP.
On a year-on-year basis, production of nine of 23 items within manufacturing fell in September.
The decline in the electricity and manufacturing sector’s output could be attributed to surplus rainfall during the month. In September, rainfall in India was 13% above the benchmark.
Within the use-based category, production growth of all the seven sectors declined on a year on year basis from the levels seen in August. Still, production of consumer durables and capital goods rose sequentially.
Notably, the index of consumer durables was at a 15-month high in September, indicating firming up of demand ahead of the festive season. And the capital goods index, which was at a six month high, reflected the ongoing increase in the category’s production amid the sustained rise in capital expenditure across the country, particularly from the government side.
In the first half of the current fiscal year, IIP growth averaged 6.0% lower than 7.1% in the corresponding period of last year.
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 7-10% in that month, boosted by a favourable base for some sectors owing to the early onset of festive season in 2022 and the relatively fewer working days in October 2022,” said Aditi Nayar, chief economist, ICRA.
Source:financialexpress.com