India’s factory output posts 3.1% growth in September

Economists were, however, concerned over the tepid growth in manufacturing and weakening growth trend in labour-incentive sectors such as textile, apparel and leather products since June. The manufacturing sector barely grew by 1.8% compared to the negative growth in August.

“Though demand for infrastructure goods will continue to get support from sustained government capex spending both at the union and state levels, the weak recovery in other sectors could cap the overall growth of factory output in the near term. The spell of abnormal rainfall during October appears to have had an impact on the coal and electricity sectors. High-frequency indicators suggest coal production in October was up 3.4% year-on-year while power generation was up 3.1%. Factory output is expected to grow in low-single digits in October,” India Ratings economists Sunil Kumar Sinha and Paras Jasrai said.

View Full Image

Notably, consumer durables saw a contraction in output over the last two months, contrary to the typical growth period ahead of the festive months with increasing demand. Consumer durables output slipped 4.5% in September after falling 2.5% in August.

CareEdge chief economist Rajani Sinha said the poor performance of IIP consumer durables and non-durables is worrisome. Improvement in domestic consumption demand will be critical for a sustained recovery in India’s growth momentum. Strong growth in capital goods and Infrastructure is encouraging and is hopefully a precursor to a pick-up in the capex cycle, she said.

“The positive feature is the strong growth in the auto sector as well as non-electrical machinery with support from metals and non-metallic minerals. Clearly, the momentum seen in the infra space has helped the cause here. We may expect, at best, stable growth in the coming months with the festival season nearing the end. It does look like that while consumption has increased as indicated by goods and services tax collections, some part of the demand moved to the gold and jewellery segments,” Madan Sabnavis, chief economist, Bank Of Baroda, added.