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India’s industrial output grew 5.2% in January, slightly faster than the 4.7% increase in December 2022, boosted by a double-digit increase in power generation for the third consecutive month, though that manufacturing production growth remained tepid at 3.7%.
Output of consumer durables contracted for the second month in a row, falling 7.5% in January, slightly less than the 11% decline in December. The contraction in output comes on top of a 4.4% fall in January 2022.
Consumer durables production, which fell 13% in October 2022, grew 6.2% in January, marking the slowest growth rate in three months. Output levels fell 5.7% sequentially from December 2022 levels, indicating a slowdown in consumption trends.
On an end-use basis, output of intermediate goods was almost flat year-on-year, but production of capital goods jumped 11% while primary goods grew 9.6%. While the rise of the two segments was fueled by low sub-2% growth rates a year ago, infrastructure and construction goods’ output grew 8.1% in January compared to a nearly 6% increase in the same month last year. year.
Manufacturing growth at 3.7% was on the lower side as growth was just 1.9% last year, with textiles and electronics falling on the month’s output scale, Bank of Baroda chief economist Madan Sabnavis said. . The textile sector, he said, has been hit by rising costs and declining exports.
“The group of computers and electronics that will benefit most from the Production Linked Incentive scheme, decreased by 29.6%. Given the 3% contraction between April 2022 and January 2023, those gains do not seem to have accumulated yet,” he said.
High inflation, rising interest rates, weak external demand and weakening domestic pent-up demand pose downside risks for the momentum of industrial activity going forward, says CARE Ratings’ chief economist which is Rajani Sinha.
ICRA chief economist Aditi Nayar expects growth in the Index of Industrial Production (IIP) to ease in February to anywhere between 3% and 5% in February, based on the weaker performance of indicators such as rail freight and ports cargo traffic, electricity generation, auto output and coal production.