India's industrial production slows to 4.2% in June

India's Index of Industrial Production (IIP) slowed to 4.2% in June 2024, from 5.9% in May, according to data released by the Ministry of Statistics & Programme Implementation (MoSPI) on August 12. The IIP showed a marginal year-on-year (YoY) improvement from 4% in June 2023. Growth in core industries, which make up 40% of the IIP, fell to a 20-month low of 4% in June, from 6.4% the previous month.

Electricity production growth decelerated to 8.6% in June, compared to 13.7% in May. Additionally, both crude oil and refining sectors contracted. Manufacturing growth also decreased to 2.6% from 5% in May. The mining sector was the only major area to experience an increase, rising to 10.3% from 6.6% earlier. On a sequential basis, core sector industries contracted by 3.1% in June.

The top three contributors to growth of the IIP for June 2024 are Primary Goods, Consumer Durables, and Infrastructure/Construction Goods, the data showss.

In the manufacturing sector for June 2024, the top three contributors to the increase in the IIP are “Manufacture of electrical equipment” with a growth rate of 28.4%, “Manufacture of basic metals” at 4.9%, and “Manufacture of motor vehicles, trailers, and semi-trailers” at 4.1%.

The indices for Primary Goods stand at 156.0, for Capital Goods at 110.0, for Intermediate Goods at 159.0, and for Infrastructure/Construction Goods at 178.4 for June 2024. Additionally, the indices for Consumer durables and Consumer non-durables stand at 126.9 and 144.6 respectively. The growth rates of the IIP in June 2024 compared to June 2023 are 6.3% for Primary Goods, 2.4% for Capital Goods, 3.1% for Intermediate Goods, 4.4% for Infrastructure/Construction Goods, 8.6% for Consumer Durables, and -1.4% for Consumer Non-Durables, it states.

Aditi Nayar, chief economist & head research and outreach ICRA, says, “The IIP growth slightly trailed our forecast (4.5%) led by manufacturing. Notwithstanding the mixed trends in the available high frequency data for July 2024, ICRA anticipates the YoY IIP growth to ease to 2.5-4.5% in that month, amid an adverse base (+6.2% in July 2023). With a slowdown in Government capex amidst the elections and lacklustre rural demand as well, we anticipate a moderation in the GDP growth print for Q1 FY2025.”