Mint Explainer: Why did India's industrial production fall in June?
NEW DELHI: India's industrial production growth dipped to 3.7% in June, from 5.3% in May. Mint explains why. The growth fell during June primarily due to weaker manufacturing growth.
Manufacturing growth, at 3.1%, brought down the overall growth rate after 14 of the 23 sectors in manufacturing registered negative growth. The significant non-performers were food, textile related and electronics among others. The IIP growth was below the projections made by economists at Bank of Baroda, who pegged it at 5.5% during June.
Analysts in a Reuters poll had forecast an expansion of 5%. Meanwhile, the industrial output for May was revised to 5.3% from 5.2%. With the risks to global growth titled to the downside, economists expect weakness in external demand to persist.
On the domestic front, a durable recovery in demand remains important for industrial activity, according to Care Ratings Ltd. Domestic demand also faces headwinds from the uptick in inflation fuelled by an acceleration in food prices. Weather-related uncertainties could also play a spoilsport for a recovery in rural demand.
The YoY (year-on-year) performance of most available high-frequency indicators such as petrol and diesel sales, generation of GST e-way bills, output of Coal India Limited, cargo traffic at major ports, rail freight traffic and electricity generation improved in July 2023 relative to June 2023, said Aditi Nayar, Chief Economist, at Icra Ltd. "In contrast, the YoY growth in vehicle registrations and finished steel consumption deteriorated in July 2023, relative to the previous month, while remaining in double digits. Based on these trends, ICRA expects the YoY IIP growth to witness an uptick to about 4-6% in July 2023," Nayar added.
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