India's Industrial Production Surpasses Expectations with 5.9% YoY Growth in May

In a positive economic development, India's industrial production, as measured by the Index of Industrial Production (IIP), rose by 5.9% year-on-year (YoY) in May, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Friday. This growth surpasses the consensus estimates of 4.9% and marks an improvement from the 5% growth recorded in April.

The industrial production growth in May 2023 was reported at 5.7%, indicating a consistent upward trend. The last notable high in IIP was 11.9% in October 2023, followed by a slowdown to 2.5% in November, 4.2% in December, and 4.1% in January 2024.

Breaking down the performance by sectors, mining led the charge with a growth rate of 6.6%, followed by manufacturing at 4.6%, and electricity, which saw a remarkable increase of 13.7% YoY in May 2024. In comparison, the same sectors grew by 6.4%, 6.3%, and 0.9% respectively in May 2023.

The use-based classification of industrial production revealed varied performance across segments. The capital goods segment recorded a modest growth of 2.5% in May 2024, a significant drop from the 8.1% growth seen in the same month last year. However, the consumer durables segment showed a substantial surge, growing by 12.3% compared to the 1.5% growth in May 2023. Non-durable consumer goods saw a growth of 2.3%, down from the 8.9% increase recorded in the same period last year.

Infrastructure and construction goods grew by 6.9% in May 2024, a decrease from the 13.0% YoY growth recorded in the previous year. Meanwhile, primary goods output increased by 7.3%, nearly double the 3.6% growth observed in May 2023.

This robust industrial production data comes at a time when India's economy is navigating through various challenges and opportunities. The improved performance in key sectors is a positive indicator for the overall economic outlook, signaling resilience and potential for sustained growth in the coming months.

In other economic news, Prime Minister Narendra Modi's government may shift away from its privatisation plans, focusing instead on overhauling state-run firms. Additionally, India's forex reserves have reached an all-time high of $657.16 billion, reflecting a strong external sector position. Despite the call for income tax cuts from the middle class, it remains uncertain if the upcoming Union Budget will accommodate these demands.

Moreover, India's retail inflation accelerated to 5.1% in June, driven by a significant rise in food inflation. The Reserve Bank of India (RBI) governor also indicated that inflation is likely to hover around 5% in June, underlining the central bank's ongoing efforts to manage price stability.

Overall, the latest IIP data provides a cautiously optimistic outlook for India's industrial sector, highlighting the importance of continued policy support and structural reforms to sustain the growth momentum.