India’s Industrial Output Grows 5.7% in July, Highest in Five Months

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India’s industrial output grew by 5.7 percent in July, the highest in five months. This is above the consensus estimate of 5 percent and comes after a revised growth of 3.8 percent in June.

The growth was supported by an improvement in the output of all three sectors – mining, manufacturing, and electricity. Mining output was the highest in 14 months, while electricity production was at a five-month high. Manufacturing sector output grew by 4.6 percent, up from 3.1 percent in June.

However, the performance of the manufacturing sector has raised questions among economists, as the quarterly GDP data shows that growth in the gross value added of the sector was 4.7 percent in April-June, only slightly higher than 4.5 percent in January-March and lower than 6.1 percent in April-June 2022.

In terms of the use-based classification of goods, the July numbers showed more of the same. Capital goods production was 4.6 percent higher, while output of infrastructure goods rose by double-digits for the fourth month in a row. However, consumer durables output contracted again, this time by 2.7 percent, although that of non-durables surprisingly increased by 7.4 percent.

According to economists, the sharp rebound in consumer non-durables will have to be monitored, as the festive season is likely to provide a fillip to consumption demand in the near term. Over a longer period of time, unfolding of the domestic demand scenario remains critical for industrial activity. The elevated food inflation and monsoon-related vagaries could pose a risk for consumption demand.


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