Industrial Production Grows 19.6% in May, Manufacturing Output up by 20%: Data

India’s industrial production in May 2022 witnessed a jump of 19.6 per cent. The manufacturing sector’s output rose 20.6 per cent during the month, according to the Index of Industrial Production (IIP) data released by the National Statistical Office (NSO) on Tuesday. In May 2021, the IIP had grown by 27.6 per cent.

In May 2022, the mining output climbed 10.9 per cent, and power generation increased 23.5 per cent. Industrial production has been hit due to the coronavirus pandemic since March 2020, when it had contracted 18.7 per cent.

It shrank 57.3 per cent in April 2020 due to a decline in economic activities in the wake of the lockdown imposed to curb the spread of coronavirus infections.

Sunil Kumar Sinha, principal economist at India Ratings and Research, said, “Backed by a healthy growth in infrastructure industries, Ind-Ra had expected IIP to clock a double-digit growth in May 2022. The data released today shows that IIP indeed grew in double digits at 19.6 per cent in May 2022 and is an eleventh-month high despite a high base of May 2021.”

He added that at the broad level, all segments (namely manufacturing, mining and electricity) contributed to the growth. While manufacturing, the largest component at the broad level grew 20.6 per cent in May 2022, mining and electricity recorded a year-on-year growth of 10.9 per cent and 23.5 per cent, respectively.

“A significant pick-up in IIP growth though is indicative of ongoing economic recovery, but its sustainability is still not a given in view of raging inflation and adverse global geopolitical situation. A yoy growth in high single or double digit for at least 5-6 months may perhaps would be required to believe that industrial growth is finally on a path of sustained recovery,” Sinha said.

He also said that at used-based levels, while capital and consumer durables recorded a very high 54 per cent and 58.5 per cent y-o-y growth, respectively, in May 2022, primary, intermediate and infrastructure/construction goods recorded a y-o-y growth of 17.7 per cent, 17.9 per cent and 18.2 per cent, respectively.

“The worst performing consumer non- durables segment grew at just 0.9%. The double-digit growth in the capital goods segment perhaps has been benefitting from the capex push provided by the government and the consumer durables segment is gaining from the unusual hot summer, pent up demand and K shaped recovery. It appears that the paltry yoy growth in the consumer non-durables is also a fall out of K-shaped recovery. This is a disturbing trend and if persist for long will be a risk for sustainable industrial recovery,” Sinha said.

Vivek Rathi, director (research) of Knight Frank India, said the industrial production in May 2022 depicted a broad-based sequential improvement indicating at a resilient economic growth so far, unlike in the other major economies where the growth is faltering. “To bring inflation under control and at the same time to harbour growth we expect the RBI to conclude its Aug 2022 policy meeting with a moderate 25-35bps repo rate hike.”

As the economic activities despite inflation and global headwinds continues to normalise further India Ratings and Research expects IIP to clock yoy growth in the range of 11-13 per cent in June 2022. Going forward, the electricity output is expected to clock double-digit growth again in June 2022 (power generation in June 2022 was 17.7% higher than June 2021). The coal output was up 32.6 per cent y-o-y in June 2022, and is expected to keep the momentum in the mining sector.

Reference: https://www.news18.com/news/business/industrial-production-grows-19-6-in-may-manufacturing-output-up-by-20-data-5541757.html