- India's industrial output reached a three-month high of 3.5% year-on-year in October, driven by consumer durables and garment manufacturing.
- Manufacturing output rose 4.1% year-on-year in October, with garment manufacturing seeing a significant 7.1% growth.
- Consumer durables output rose 5.9% in October, while capital goods output rose 3.1% year-on-year.
- Despite a GDP growth slowdown, the Indian economy remains resilient, with a positive outlook for the future.
India's industrial output has seen a significant rise, reaching a three-month high of 3.5% year-on-year in October. This surge was primarily driven by an increase in consumer durables and garment manufacturing during the festival season, according to government data. The growth aligns with the 3.5% forecast in a Reuters poll of economists and is higher than the 3.1% growth observed in the previous month.
Manufacturing output, a key component of industrial production, rose 4.1% year-on-year in October, marking an improvement from the 3.9% growth in the previous month. This growth was largely driven by the garment manufacturing sector, which saw a significant 7.1% year-on-year growth in October, a stark contrast to the 0.1% growth in the previous month. This surge was attributed to an increase in export orders as global retailers increased shipments from India following the political crisis in Bangladesh.
The electricity generation sector also saw growth, with a 2% year-on-year increase in October compared to a 0.5% rise in September. Mining output gained 0.9% year-on-year, up from a 0.2% growth a month ago.
Consumer Durables and Capital Goods Drive Growth
Consumer durables output, which includes household appliances and vehicles, rose 5.9% in October against 6.5% a month ago. Capital goods output, another significant component of industrial production, rose 3.1% year-on-year in October compared to 3.6% in September.
Economist Madan Sabnavis of Bank of Baroda noted the influence of the festival season on these figures, predicting further growth in November. India's festival season typically runs from mid-September to end-November.
In the April-October period, industrial output increased by 4%, compared to a revised 7% growth a year earlier. Aditi Nayar, an economist at ICRA, anticipates the year-on-year IIP growth to accelerate to a much more palatable 5%-7% in November 2024, aided by a favourable base.
Broader Economic Context and Global Outlook
In the broader economic context, India's GDP growth slowed to 6.7% in the April-June quarter of FY 2024-25. Despite the slowdown, analysts remain hopeful, pointing out that there are no evident indications of a slowdown, implying that any temporary pause could be reversed with favourable weather conditions and the approaching festive season.
The Indian economy has demonstrated resilience, backed by stable macroeconomic indicators, including controlled twin deficits and sufficient reserves. Despite the obstacles presented by climate conditions and external demand, the overall outlook of the Indian economy remains optimistic.
In the global context, Japan's economic outlook in October 2024 indicated expectations of stronger rate cuts in the United States and more rate hikes in Japan. This caused the yen to appreciate, lowering the cost of imports, notably for food and energy. The import price index in August was up just 2.6% from a year ago, after rising by 10.8% in the previous month, signalling that imported inflation has responded quickly to the stronger yen.
