India’s industrial output slows to 7.1% in February

16th April 2018

India’s factory output remained strong in February, suggesting a rosier outlook for the economy, despite a slight moderation due to the decline in mining activity.

The index of industrial production rose 7.1 percent in February over the year, compared with a revised 7.4 percent growth in the previous month, according to data from the Ministry of Statistics and Programme Implementation. A Bloomberg poll of economists had projected a 6.8 percent rise.

Slightly lower industrial output in February was expected, yet the rate of growth is “modestly higher than anticipated”, Aditi Nayar, principal economist at ICRA Ltd., said in an emailed note. This also suggests that economic growth may improve. “With IIP growth exceeding 7 percent for January-February 2018, the outlook for gross value added growth for Q4FY18 has become brighter,” she added.

The consumer durables and consumer non-durables segments recorded a growth of 7.9 percent and 7.4 percent respectively. That signals that the underlying consumer demand in the economy remains healthy, Nayar said.

The pace of mining activity however declined 0.3 percent in February. This negative growth in mining reflects the decline in coal production, said Soumya Kanti Ghosh, Group Chief Economic Adviser at State Bank of India.

Industrial production has been rebounding since October when it slowed to 2.2 percent. Since then, it has kept growing in the high single-digit range. “The turnaround of IIP growth in the second half of FY18 is a good news,” Ghosh wrote in the SBI Ecowrap.

The use-based classification showed that production of primary goods rose 3.7 percent while capital goods output increased 20 percent.

Other Key Highlights

• Manufacturing output rose 8.7 percent over the same month last year.
• Electricity generation rose 4.5 percent year-on-year.
• Mining output declined 0.3 percent over last year.
• Infrastructure and construction goods’ output grew 12.6 percent.

Source: BLOOMBERG QUINT