Industrial growth eases to a three-month low in September; experts say expect a bounce back in October

Excess rainfall, along with a high base, caused industrial growth to ease more than expected to a three-month low of 5.8% in September, compared with 10.3% in the previous month. However, experts indicate that growth is likely to bounce back in October.

“The YoY performance of a majority of the available high frequency indicators improved in October 2023, relative to September 2023,” said Aditi Nayar, chief economist, Icra.

Icra expects a favourable base to help IIP growth average between 7-10% range in October.


The government’s revenue collection from Goods and Services Tax rose 13% in October its fastest pace in 10 months, touching Rs 1.72 lakh crore.

Overall passenger vehicle dispatches rose 16% in October, according to data released by the auto industry body Society of Indian Automobile Manufacturers (SIAM) Friday.

“The high-frequency indicators such as coal, power demand, steel, and e-way bills grew in the range of 11%-30% y-o-y, pointing to a continued progression of economic activity in October 2023. This, along with the seasonal push owing to festive demand and a favourable base effect, would keep the IIP growth around 10% in October 2023,” said Ind-Ra economists Paras Jasrai and Sunil K Sinha

Experts believe that the trends of the first half of the year indicate that the yearly growth is likely to be stable.

“The overall performance is encouraging and should lead to stable industrial growth for the year. The crux will be a pick-up in consumption and investment,” said Madan Sabnavis, chief economist, Bank of Baroda.

The index of industrial production rose 6% in the April-September period, with the manufacturing sector registering 5.7% growth.

“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,” Sabnavis added.

Broad-based easing
All three major sectors of the index registered an easing in September. While electricity eased to 9.9% in September compared with 15.3% in the previous month and mining eased from 12.3% to 11.5%, the decline in growth of manufacturing more than halved to 4.5% from 9.3% in the previous month.

“While the moderation was broad-based across all sub-sectors and use-based categories, the performance of consumer goods was especially tepid at +1.0% and +2.7%, respectively, for durables and non-durables, resulting in the manufacturing sector's performance trailing that of mining and electricity in September 2023,” said Nayar.

Sequentially, there was a decline across all three categories as well, with manufacturing easing 2% and electricity declining 6.6%.

“Encouragingly, output in textiles sector rose in y/y terms for the third month in a row, similar to the improvement in corresponding exports,” said Rahul Bajoria, MD & head of EM Asia (ex-China) Economics, Barclays.

Capital goods and consumer goods were the only industries to avert a sequential decline in September.

" Both consumer durables and capital goods grew sequentially (in contrast with other sectors and the headline which shrank m/m), though it remains to be seen if the trend will sustain,” Bajoria said.

Consumer non-durables declined 3.5% sequentially but registered a 2.7% rise annually.

“Rural demand has to be watched closely as kharif crop could be sub-optimal,” said Sabnavis.

Minor hiccup
- IIP Growth eases to 5.8% in September vs 10.3% in August

- Economists say bounce back in October

- Trends indicate industrial growth to stay steady for the year

(% change, y-o-y)
	IIP
Apr-22	6.7
May-22	19.7
Jun-22	12.6
Jul-22	2.2
Aug-22	-0.7
Sep-22	3.3
Oct-22	-4.1
Nov-22	7.6
Dec-22	5.1
Jan-23	5.8
Feb-23	5.8
Mar-23	1.7
Apr-23	4.6
May-23	5.7
Jun-23	4.0
Jul-23	6.0
Aug-23	10.3
Sep-23	5.8
(% change, y-o-y)
	Aug-23	Sep-23
Mining	12.3	11.5
Manufacturing	9.3	4.5
Electricity	15.3	9.9
Primary Goods	12.4	8.0
Capital Goods	13.1	7.4
Intermediate Goods	6.8	5.8
Infrastructure/Construction Goods	13.5	7.5
Consumer Durables	5.8	1.0
Consumer Non-durables	9.6	2.7
MoSPI