The government on Friday reported that industrial growth, measured in terms of Index of Industrial Production (IIP), recorded 5.8 per cent in September. Although it is higher than 3.3 per cent of September 2022, it is much lower than 10.3 per cent recorded in August, this year.

Manufacturing, mining and electricity showed good performance, data released by National Statistical Office (NSO) revealed. Manufacturing sector’s output grew by 4.5 per cent in September 2023. Mining production rose 11.5 per cent during the month under review. Power output increased 9.9 per cent.

The IIP grew by 6 per cent in April-September 2023 compared to 7.1 per cent growth a year ago.

Economists are not very enthused by the latest data. Aditi Nayar, Chief Economist with ICRA Ltd said: “An unfavorable base, a shift in the festive calendar and excess rainfall caused the year-on-year (YoY) growth in the IIP to nearly halve to a lower-than-expected 5.8 per cent in September from 10.3 per cent in August.”

Tepid show

While the moderation was broad-based across all sub-sectors and use-based categories, the performance of consumer goods was especially tepid at 1 per cent and 2.7 per cent, respectively, for durables and non-durables, resulting in the manufacturing sector’s performance trailing that of mining and electricity in September.

Looking ahead, the YoY performance of a majority of the available high frequency indicators improved in October 2023, relative to September 2023. “ICRA expects the YoY IIP growth to improve to 7-10 per cent 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. However, we expect fewer working days to dampen IIP growth in November 2023,” Nayar said.

Further, she added that the shift in the festive calendar is likely to muddy YoY comparisons for the next two months as well. Consequently, it would be more meaningful to compare the average YoY growth performance in October-November 2023 vis-à-vis October-November 2022.

Nish Bhatt, Founder & CEO, of Millwood Kane International, said that IIP growth fell for the first time in three months, indicating softening of growth momentum in September.

“The growth seen is primarily driven due to good show by manufacturing, mining and electricity sectors. Moving forward, expecting the global geopolitical crises, upcoming elections, an unfavorable base and festival season imparting a fair degree of volatility to the industrial growth numbers in the coming months,” he said.