Industrial production growth slows to 4.9% in March

Manufacturing data indicates some pick up in consumption

New Delhi: India’s industrial production growth slowed to 4.9% in March 2024 from 5.6% recorded in February, mainly due to poor performance of the mining sector and capital goods, and an expected slowdown in infrastructure expenditure.

However, the manufacturing sector witnessed stronger expansion on the back of some pick-up in consumption sentiment, official data showed on Friday.

For the full financial year 2023-24, the growth in factory output, measured in terms of the Index of Industrial Production (IIP), averaged 5.8%. This is higher than 5.2% expansion recorded in 2022-23.

As per data released by the National Statistical Office, manufacturing sector growth accelerated to 5.2% in March from 1.5% recorded in the same month last year. Growth in mining production slipped to 1.2% in March 2024 from 6.8% recorded in March 2023.

Dharmakirti Joshi, Chief Economist at Crisil, said the slower growth in industrial production is likely to hit overall GDP growth in the fourth quarter of 2023-24, for which official data is scheduled to be released at the end of May.

“The slowdown in March was driven by infrastructure and construction goods, reflecting moderating government capital expenditure at the end of the fiscal,” Crisil’s Joshi said.

Growth in the manufacturing and electricity sectors witnessed some acceleration countering the slowdown in mining output. Electricity production expanded by 8.6% in March against a contraction of 1.6% recorded in the same month last year.

As per use-base classification, growth in the capital goods segment slowed to 6.1% in March 2024 from 10% recorded in the same month last year. On the consumption front, output of consumer durables grew by 9.5% in March whereas non-durables output growth turned positive, rising by 4.9% following two consecutive months of contraction.

“The consumption scenario remained mixed in FY24 with urban demand showing resilience while rural demand continued to lag,” said Rajani Sinha, Chief Economist, CareEdge Ratings.

“However, expectation of a good monsoon, moderating inflation, and signs of pick-up in rural demand are positives for the overall consumption scenario,” Sinha said.

During FY24, there was wide variation in the monthly IIP output data. The lowest growth during the fiscal was recorded in November at 2.5%, while the highest was in October at 11.9%.

This wide variation in growth, according to Paras Jasrai, senior analyst at India Ratings and Research, indicates that the “factory output is still not stable and assuring”.

According to Aditi Nayar, Chief Economist, ICRA, the IIP growth is likely to decelerate further in April due to unfavourable base. IIP growth in April 2023 stood at 4.6%, while in March 2023 it was 1.9%.