Industrial output growth quickened in November to a 25-month high of 8.4% bolstered by strong performances in the manufacturing, construction, and consumer non-durables sectors, official data show.
Separately, Consumer Price Index (CPI) data for December showed retail inflation quickened to a 17-month high of 5.21%, spurred by food and fuel price gains.
The acceleration in the Index of Industrial Production (IIP) growth was significant, coming after October’s 2.24% increase. Growth in the manufacturing component of the index touched 10.2% in November, up from 2.47% in the previous month. This strong performance was accompanied by a 13.5% jump in the infrastructure and construction sector, up from 5.21% in October.
‘Base effect’
Economists said a low base -- in November 2016, when the government demonetised high value currency, IIP grew 5.1% even as the index number itself shrank from the preceding month-- and public spending contributed to the stronger IIP reading.
“It needs to be noted that it could be partially attributed to the base effect as November 2016 was the month when IIP had taken a hit due to demonetisation,” Jaikishan J Parmar, Research Analyst at Angel Broking, wrote in a note. “A clearer picture emerges when we look at the IIP for the 8-month period from April to November 2017, which stands at 3.2%,” he added. The figure for the comparable 8-month period in 2016 was 5.5%.
Growth in manufacturing in November was led by strong double-digit growth in ‘food products’, ‘pharmaceuticals, medicinal chemical and botanical products’, and the ‘computer, electronic and optical products.’
The other sector that saw robust growth was consumer non-durables, which grew 23.1% in November, up sharply from 7.7% in the previous month. The consumer durables sector grew 2.5%, recovering from October’s 6.89% contraction.
“I think the consumer non-durables growth reflects festive demand in the last few months, and the construction data reflects government investment,” said DK Srivastava, Chief Policy Advisor at EY India. “Overall, the message is of a strong recovery.”
The data reflects an ongoing revival, said Ranen Banerjee, Partner - Public Finance and Economy at PwC India. “We saw a manufacturing uptick, which is continuing. The housing push led to the growth in the construction and infrastructure sector, but this is mostly led by government activity.”
