Industrial Growth dips to 5.8% in September, experts optimistic for October rebound

  • Industry News
  • Nov 14,23
In October, the government experienced a 13% increase in Goods and Services Tax revenue, marking its fastest pace in 10 months, reaching Rs 1.72 lakh crore.
Industrial Growth dips to 5.8% in September, experts optimistic for October rebound

Excessive rainfall, coupled with a high baseline, resulted in a more significant-than-expected slowdown in industrial growth, dropping to a three-month low of 5.8% in September, compared to the previous month's 10.3%. However, experts suggest a potential rebound in October.

Aditi Nayar, Chief Economist at Icra, stated, "The year-on-year performance of a majority of available high-frequency indicators improved in October 2023, relative to September 2023." Icra anticipates a favorable base effect to support Industrial Production (IIP) growth, projecting an average between 7-10% in October.

In October, the government experienced a 13% increase in Goods and Services Tax revenue, marking its fastest pace in 10 months, reaching Rs 1.72 lakh crore. Passenger vehicle dispatches surged by 16% according to data from the Society of Indian Automobile Manufacturers.

High-frequency indicators such as coal, power demand, steel, and e-way bills displayed year-on-year growth in the range of 11%-30% in October, indicating a continued progression in economic activity. Ind-Ra economists Paras Jasrai and Sunil K Sinha predict IIP growth around 10% for October 2023, attributing it to seasonal demand and a favorable base effect.

Analysts, including Madan Sabnavis from the Bank of Baroda, believe that the trends in the first half of the year suggest stable yearly growth. Sabnavis emphasised, "The crux will be a pick-up in consumption and investment."

The Index of Industrial Production showed a 6% rise in the April-September period, with the manufacturing sector growing by 5.7%. Sabnavis added, "This does indicate steady growth for the year, and considering that things should improve or remain stable in the next few months, the industry appears to be on the right path provided consumption recovers."

In September, all three major sectors of the index experienced a decline. Manufacturing growth more than halved to 4.5%, electricity eased to 9.9%, and mining decreased from 12.3% to 11.5%. Consumer goods, especially durables and non-durables, showed tepid performance, trailing behind mining and electricity.

While there was a sequential decline across all three categories, consumer durables and capital goods were the only industries to avoid a decline in September, growing both sequentially and annually. However, analysts caution that rural demand needs close monitoring, considering the potential sub-optimal kharif crop. Overall, the minor hiccup in September's IIP growth is expected to be followed by a bounce back in October, with trends pointing towards steady industrial growth for the year.

Source: Indiatimes

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