Factory output, measured in Index of Industrial Production (IIP), grew a tad to 4.8 per cent in July against revised June’s number of 4.7 per cent, government data released on Thursday showed. However, it is lower than 6.2 per cent of July last year.

Overall performance on sequential basis improved mainly on account of manufacturing sector. Meanwhile, experts do not see improved performance in coming months mainly because of uneven consumption.

Manufacturing and power sectors were significant drivers of this growth, with growth rate of 4.6 per cent and 7.9 per cent respectively. The mining sector also contributed, growing by 3.7 per cent in the same period.

Basic metals

Within the manufacturing sector, specific industries performed particularly well. The production of basic metals grew by 6.4 per cent, while the manufacture of coke and refined petroleum products saw a 6.9 per cent increase. The standout performer was the manufacture of electrical equipment, which surged by 28.3 per cent, making it the top contributor to the sector’s overall growth.

At the use-based classification level, there was a moderation in the growth of all the sectors in July, barring capital and intermediate goods. Capital goods registered the highest growth among use-based classification at 12 per cent. According to Paras Jasrai, Senior Analyst with India Ratings & Research (Ind Ra), this was the strongest pace of growth since October last year, signaling an uptick in investment activity in the economy.

Capex up

This was supported well by the government capex which picked up in July. The capex of the Union and the States (25 State governments) jumped 42.8 per cent to ₹1.17 lakh crore during July 2024. The intermediate goods sector growth stood at a five-month high of 6.8 per cent in the same period.

The swift progress of monsoon rainfall in the country has resulted in some slack in the electricity generation due to lower power demand. “The electricity demand and coal production declined 6.5 per cent and 7.5 per cent respectively, in August, indicative of slowdown in primary goods. Other high frequency indicators such as steel production and petroleum consumption also point to a decline in industrial growth in August. Ind-Ra expects the IIP growth to be lower than 3 per cent yoy in August.” Jasrai said.  Growth rate was 10.9 per cent last year.

Rajani Sinha, Chief Economist with CARE said consumption-related segments painted a mixed picture, as output of consumer durables grew by 8.2 per cent, while non-durables output remained in the contractionary zone, falling by 4.4 per cent. An improvement in kharif sowing amidst a good monsoon bodes well for the private consumption demand. “Overall, a sustained and meaningful improvement in consumption and private capex remains critical for the performance of industrial activity,” she said.