India’s industrial production growth fell to a five-month low of 1.1% in March 2023, according to government data released. The poor performance of the power and manufacturing sectors was primarily responsible for this decline, with the manufacturing sector growing only 0.5% compared to 1.4% a year ago. Power generation declined by 1.6% in March 2023, compared to a growth of 6.1% last year.
Lowest Level of Growth Recorded Since October 2022:
The previous lowest level of growth was recorded in October 2022 when there was a contraction of 4.1%. The factory output growth, measured in terms of the Index of Industrial Production (IIP), was 2.2% in March 2022. The decline in industrial production growth is significant, given that it comes after months of sustained growth.
Capital Goods Segment Records a Growth of 8.1%:
As per use-based classification, the capital goods segment recorded a growth of 8.1% in March compared to a growth of 2.4% a year ago. Consumer durables output, however, declined by 8.4% during the month compared to a contraction of 3.1% a year ago. Consumer non-durable goods output also declined by 3.1% compared to a contraction of 4.4% last year. Infrastructure/construction goods posted a growth of 5.4% compared to a 6.7% expansion in the same period a year ago.
Mining Output Rose by 6.8%:
Mining output rose by 6.8% during the month under review, compared to a growth of 3.9% in the year-ago period. The output of primary goods logged 3.3% growth in the month against 5.7% in the year-ago period. The intermediate goods output in March grew by 1% compared to a growth of 1.8% during the corresponding month last year.
Growth in IIP for Fiscal 2022-23 is 5.1%:
For fiscal 2022-23, the growth in IIP works out to be 5.1%, down from 11.4% in the preceding year. This decline in industrial production growth is a cause for concern for the Indian economy, which had been showing signs of recovery from the COVID-19 pandemic. The poor performance of the power and manufacturing sectors is particularly worrisome, as these are key drivers of economic growth. The government will need to take steps to address the issues facing these sectors to ensure sustained growth in the future.
About Index of Industrial Production (IIP) key points:
The Index of Industrial Production (IIP) is a key indicator of the performance of India’s industrial sector. Here are some key points about IIP:
- The IIP is a composite indicator that measures changes in the volume of production of a basket of industrial goods.
- The IIP is released monthly by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation, Government of India.
- The IIP covers three sectors: mining, manufacturing, and electricity.
- The IIP is calculated using the Laspeyres formula, which takes a fixed base year and measures changes in quantity relative to that base year.
- The base year for the IIP is currently 2011-12, which means that the index is calculated relative to the volume of production in that year.
- The IIP is available in three forms: the overall index, the sectoral index, and the use-based index.
- The overall index measures changes in the volume of production of all industries covered by the IIP.
- The sectoral index measures changes in the volume of production of individual sectors, such as mining, manufacturing, and electricity.
- The use-based index measures changes in the volume of production of goods based on their intended use, such as capital goods, consumer goods, and basic goods.
The IIP is an important indicator of the health of the industrial sector and is used by policymakers, economists, and analysts to track changes in industrial production and to monitor the performance of the economy.
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