Aditi Nayar, Chief Economist, ICRA, on IIP

Industrial growth printed in line with our forecast (19.0%) in May 2022, expectedly spiking from the revised 6.7% in April 2022 on the subdued base of the second wave of Covid 19 in India in May 2021.

The sharp sequential increase in the industrial growth to the 12-month high 19.6% in May 2022 was led by manufacturing and electricity, with a more modest uptick reported by mining activities relative to April 2022. In terms of the use-based categories, all the sub-indices except consumer non-durables displayed a high double-digit growth in May 2022. In contrast, consumer non-durables posted a weak 0.9% YoY rise in May 2022, reflecting the limited disruption that was caused to production of this category by the second wave of Covid 19.

The IIP growth exceeded the core sector growth after a gap of eight months.

In month-on-month terms, the sharpest rise was displayed by mining (3.5% in May 2022), followed by electricity (2.8%) and manufacturing (2.0%). The month-on-month uptick in the manufacturing index was favourable compared with the mild dip in the generation of GST e-way bills in May 2022 relative to the previous month.

Relative to the pre-Covid level of May 2019, the performance was decidedly mixed, with capital goods, consumer durables and consumer non-durables trailing, and primary goods, infrastructure goods and intermediate goods posting a rise in May 2022.

In line with the moderation in YoY performance recorded by most high frequency indicators in June 2022, we expect the IIP growth to ease to ~11-13% in that month. Industrial growth is subsequently expected to moderate to single digits in Q2 FY2023, as the base effect dissipates.

Source : Equity Bulls

Keywords

IIP India Forecast ICRA