India's industrial sector hit a significant speed bump in October, with growth decelerating to its weakest level in over a year, according to official data released on Monday. Provisional figures from the Ministry of Statistics and Programme Implementation (MoSPI) revealed that the Index of Industrial Production (IIP) expanded by a mere 0.4% year-on-year in October 2024. This marks the slowest pace of growth in 14 months.
Key Sectors Show Contraction
The disappointing headline number was driven by contractions in two of the three major sectors. Mining output fell by 1.8% compared to October of the previous year, worsening from a 0.4% contraction in September. More strikingly, electricity generation plunged by 6.9% annually, a sharp reversal from the 3.1% growth seen in September and 2% growth a year ago.
The manufacturing sector, which carries the heaviest weight of nearly 78% in the IIP, provided a slight cushion but also showed a significant slowdown. It grew by 1.8% in October, which is substantially lower than the 5.6% expansion recorded in September and the revised 4.4% growth from October 2023.
Context and Expert Analysis
October's industrial performance represents a stark decline from the 4% annual growth (revised upward from 3.2%) registered in September and is far below the 3.7% expansion witnessed in the same month last year. This volatility underscores a fragile and uneven recovery for Indian industry, grappling with soft domestic demand, global economic uncertainty, and sector-specific headwinds.
Economists point to the festive calendar as a contributing factor. N.R. Bhanumurty, director at Madras School of Economics, noted that the reasoning of fewer working days and reduced workforce during the festival period is correct to some extent. "As IIP covers volume of production, reduction in number of working days due to festivals must have led to this slower growth," he explained.
The weakness was foreshadowed by data from the core infrastructure sectors, which account for over 40% of industrial output. Earlier this month, provisional commerce ministry data showed that this crucial segment posted zero growth in October, with production flat year-on-year.
A Mixed Bag in Use-Based Categories
A breakdown of the data by end-use presents a mixed picture. On a somewhat positive note, capital goods production rose by 2.4% annually in October, though this was slower than the 4.4% growth in September. Output of infrastructure and construction goods also remained robust, growing by 7.9%, despite easing from 10.6% in the prior month. Intermediate goods output increased by 0.9%.
However, the consumer-facing segments showed pronounced weakness, indicating soft demand. Production of consumer durables fell by 0.5%, a dramatic swing from the 10% rise in September. More concerning was the contraction in consumer non-durables, which shrank by 4.4% annually in October, deepening from a 0.3% contraction the month before. Primary goods production also contracted by 0.6%.
This data confirms that India's industrial rebound remains fragile and uneven. After slowing in the first quarter (April-June) of the fiscal year, activity had picked up from July, but the October numbers suggest significant challenges persist, setting a cautious tone for the coming months.
