February 20, 2022
1 min read

India’s industrial activity expected to pick up


Furthermore, the use-based classification of IIP suggests weakness in both investment and consumption demand…reports Asian Lite News

India’s industrial activity is expected to gather pace in the coming months owing to a gradual pick-up in consumption as well as investment demand.

Notably, the latest Index of Industrial Production (IIP) printed at 138 (index reading) in December 2021, representing a 0.4 per cent on-year growth, down from 1.3 per cent growth in November.

“While there was an improvement in the momentum i.e., sequential or on-month movement of industrial activity in December – likely reflecting some easing of raw material supply disruption – it was not very robust,” Crisil Research said.

“Softness in both consumption and investment demand kept industrial, especially manufacturing, growth subdued.”

Besides, the slowdown in on-year IIP growth to 0.4 per cent in December, from 1.3 per cent in November, reflected weaker manufacturing activity which, at 77.6 per cent, is the largest component of IIP.

“To be sure, the slowdown is also the result of a high base (as IIP had risen in December 2020 over November 2020).”

Segment wise, manufacturing IIP declined 0.1 per cent on-year in December, whereas mining and electricity grew 2.6 per cent and 2.8 per cent, respectively, containing the decline in overall IIP growth.

“The weakness in manufacturing growth was in sync with the Purchasing Manager’s Index, which eased to 55.5 in December from November’s 57.6. That said, strong export performance did some counter-balancing.”

Furthermore, the use-based classification of IIP suggests weakness in both investment and consumption demand.

However, Crisil Research, said: “Industrial growth fell in January due to rising omicron cases. This could also have slowed demand a bit, and caused some logistical disruptions.

“Beyond that, going ahead, industrial activity is expected to gather pace for two reasons. One, raw material shortages are slowly getting addressed, and consumption and investment demand are expected to gradually pick up.”

The second reason it cited was that government is expected to step up Capex, which should give a lift to the manufacturing of infrastructure-related products and services.

“That said, high commodity prices and their impact on manufacturing activity will remain the monitorables in the road ahead.”

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