India's industrial production contracted by 4 per cent in October, the sharpest fall in 26 months, mainly due to decline in output of manufacturing and subdued performance of mining and power generation sectors, according to official data released on Monday.
The Index of Industrial Production (IIP) had grown 4.2 per cent in October 2021. The previous low was (-) 7.1 per cent in August 2020.
As per the IIP data released by the National Statistical Office (NSO), the manufacturing sector's output declined by 5.6 per cent in October 2022 as against a growth of 3.3 per cent recorded in the year-ago month.
The mining output rose by a meagre 2.5 per cent and power generation increased by 1.2 per cent during the month.
The data further revealed that capital goods output declined by 2.3 per cent in October as against a contraction of 1.6 per cent in the same month last year.
The production of consumer durables too shrank by 15.3 per cent and for consumer non-durables, the decline was 13.4 per cent.
There was also a decline of 2.8 per cent in the output of intermediate goods.
The primary goods and infrastructure/construction goods segments showed growth at 2 per cent and 1 per cent, respectively.
During the April-October period of the fiscal, the overall IIP growth decelerated to 5.3 per cent from 20.5 per cent in the year-ago period.
Commenting on the data, Aditi Nayar, Chief Economist of ICRA, said while the IIP posted a deeper-than-expected contraction, mirroring the anemic performance of exports, this chiefly reflects holidays during the festive period.
The year-on-year (YoY) growth of most available high frequency indicators improved in November relative to October 2022, partly reflecting the subdued base owing to the relatively late onset of the festive season in 2021 vis-a-vis 2022.
"Given that the YoY growth in both these months is impacted by base effects, we believe that an average performance of October and November 2022 would provide a better gauge of the actual growth momentum and demand dynamics," Nayar said.
Madan Sabnavis, Chief Economist at Bank of Baroda, said capital goods has been disappointing as it indicates that investment is lagging. Negative growth comes over negative growth last year too.
Private sector investment has not picked up so far, he noted.
"Quite clearly high nominal consumption has been due to higher inflation. Future prospects look not so positive as we move to the end of the festival months," Sabnavis added.
The NSO data said during April-October 2022-23, mining sector grew by 4 per cent compared to 20.4 per cent in the year-ago period.
The growth in manufacturing sector was 5 per cent during April-October as against 21.8 per cent in the comparable period of 2021-22.
The expansion in electricity generation during the seven months of the fiscal was 9.4 per cent, lower than 11.4 per cent during April-October 2021-22.
