India’s industrial production continues to surprise on the upside, giving strong indications of solid recovery going on in the Indian economy. The Index of industrial production (IIP) surged 9.1% in the month of September, compared with 10.4% in the previous month and 6% in the same month last year.
What is important is that the September IIP number, unlike the August double digit jump, has come on a much higher base. September’s 9.1% growth on top of 6% growth clearly shows strong sequential improvement compared with August’s 10.4% growth on top of poor base of 2.1% in the previous year. In other words, the continuous strength in the IIP numbers shows that it is not just the base effect that is pushing the IIP, but the recovery momentum is also playing a substantial role.
The growth in the index was supported by all the constituents with manufacturing activity, which grew by 9.3% against 6.2% last year while electricity production surged by 7.9% against 4.4% year-on-year, and mining output surging by 8.6% compared with 5.5% last year.
Looking at the use based classification, basic goods registered a growth of 6.7% versus 5% last year while intermediate goods expanded by 10.8 against negative 2.5% last year. Production of consumer goods increased by 8.2% against 7.4%. Consumer durables registered strong growth of 22.2% against 14.7% last year while consumer non-durable slowed down a bit at 2.6% against 4.2% in the same month a year ago.
As a result of strong growth in last three months, April-September IIP growth now stands at 6.5% against 5% in the same period last year. Meanwhile, the government also revised the IIP growth figures for the previous month to 11% against 10.4% reported provisionally.
Strong industrial growth in India has now raised the hopes that overall growth in GDP should improve going forward. Given the fact that IIP numbers have been extremely good in the three months of September quarter, industrial contribution to the gross domestic product should be able to offset to a large extent the downside in agriculture production, which is anticipated due to poor monsoon.