India’s industrial recovery from the pandemic remained sluggish with manufacturing growth in February at 1.7%, slightly above the revised estimate of 1.46% recorded in January, with manufacturing activity continuing to falter.
The February Industrial Production Index (IIP) figures released by the National Bureau of Statistics are relative to a low base from February 2021, when industrial production contracted by 3.2%.
Year-on-year manufacturing output growth slowed further to just 0.8% in February, from 1.3% in January. Manufacturing was down 3.4% in the same month a year ago. On a monthly basis, however, production contracted for the second straight month, contracting 5.5% in February from January.
Mining production increased by 4.5% in February 2022, after a 4.4% decline in February 2021, while power generation grew by 4.5%, compared with a 0.1% increase last year. However, the production of both sectors was 1.2% and 2.9% lower than in January. Total IIP in February was 4.7% lower than in January 2022.
“The worrying aspect is that manufacturing has contracted sequentially, with both consumer durables and non-durables contracting, showing that consumption remains a concern,” said Rajani Sinha, chief economist at CARE Ratings. Manufacturing will continue to feel the effects of soaring commodity prices and supply shortages, while escalating inflationary pressures will dampen already weak consumer sentiment, she noted.
Rating agency ICRA also called February’s IIP reading “below expectations” and underperformed core sectors as non-core index components such as consumer staples disappointed.
“The 8.2% decline in consumer discretionary can be partly attributed to a high base and restrictions in early February, but disheartening 5.5% growth was also recorded in consumer discretionary,” said chief economist Aditi Nayar.
Although ICRA expects IIP growth to rise to 3% to 5% in March, the outlook for sectors like autos, which depend on key commodities sourced from war-torn Russia or Ukraine and China, is not rosy new COVID-19 lockdowns.