Official statistics issued on Thursday indicated that the growth of the Index of Industrial Production (IIP) improved slightly to 4.8% in July from 4.7% in June, mostly because of an increase in manufacturing activity. The growth rate in manufacturing in July was 4.6%, up from 3.2% in June. In contrast, in July, the growth rates for mining and power were 3.7% and 7.9%, respectively.
Both categories had growth in June of 10.3% and 8.6%, respectively. Significantly more rain fell in July, which decreased temperatures and reduced the need for electricity while increasing production. With the exception of capital and intermediate goods, all sectors saw a decrease in their year-over-year increase in July at the use-based categorisation level.
The month saw capital goods grow at a nine-month high of 12%, indicating a pick-up in investment activity. This was bolstered by the government’s capital expenditures, which increased in July 2024. The CAPEX of the states (25 state governments) and the union increased by 42.8% year over year to Rs 1.17 trillion in July, according to a report from India Ratings and Research (Ind-Ra).
The growth of consumer non-durables dropped to (-)4.4% from (-)1.5% in July, while the growth of consumer durables moderated to 8.2% from 8.4% in June. It took the latter 21 months to descend at its highest angle. According to Ind-Ra, “This suggests that the stress in rural demand hasn’t bottomed out yet.”
An increase in kharif sowing during a decent monsoon bodes well for the demand for private spending, according to Rajani Sinha, chief economist at CareEdge. “In general, the performance of industrial activity depends on a sustained and significant improvement in consumption and private capital expenditures,” the speaker stated. The statistical impact of a large base is expected to cause economists to project the August IIP print to be about 3%. August 2023 saw a 10.9% rise in IIP.
