Higher commodity prices to weigh on industrial production in FY23
India's Index of Industrial production (IIP) moved to an 8-month high of 7.1% YoY in Apr-22 from an upwardly revised print of 2.2% in Mar-22 (earlier 1.9%). On sequential basis, in line with seasonal phenomenon the index contracted by 9.2% MoM in Apr-22 from an expansion of 12.9% in Mar-22.
Despite improvement in capacity utilization levels (as per RBI survey the early results for capacity utilization stands at 75% in Q4 FY22), the overall trend in manufacturing segment since Sep-21 has remained subdued reflecting incomplete demand revival and supply shortages in some sectors. Nevertheless, on an encouraging note, manufacturing sector has recorded a lower contraction of 8.8% in Apr-22 as compared to the average contraction of 13% recorded in the past 4 years (excluding FY21 on account of the pandemic).
Overall, the spurt in prices of key commodities and importantly, the fresh supply chain bottlenecks triggered by the continuing Russia-Ukraine conflict are likely to slow down the revival in the industrial output in the near term. From growth perspective, Acuité has retained GDP growth for FY23 at 7.5% with moderate downside risk
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