India’s industrial production growth is projected to ease to 6% in September, a noticeable dip from August’s 8%, according to a Union Bank of India research report.
This comes ahead of the government’s official Index of Industrial Production (IIP) data release on October 28.
The report highlights a significant slowdown in capital goods output, expected to grow by just 2.2% in September compared to 16.9% in August. This indicates a weakening in investment-related industrial activity, a critical component for economic expansion. Consumer durables are also anticipated to slow down, reflecting softer consumer demand.
Manufacturing output growth is forecast to moderate to 6.3% from 9%, while mining production is expected to contract further by 8%. However, there’s a silver lining with electricity generation projected to remain robust at 15.6% growth.
Despite these moderations, high-frequency indicators suggest overall economic activity remained strong. Two-wheeler sales surged by 33.4% year-on-year, hinting at a recovery in rural consumer demand, and passenger vehicle sales grew by 23.3%. Infrastructure and construction goods output also show improvement.
Union Bank acknowledges that public investment and a rebound in private capital expenditure could support industrial activity. However, it cautions about future risks, citing concerns over rural demand due to a weak monsoon and potential cost-push price increases. Global uncertainties and supply chain disruptions also pose challenges to manufacturing. The upcoming IIP data will provide a clearer picture of India’s industrial trajectory.