India’s industrial output accelerated by 8.0% in August compared to a year earlier, up from a 6.7% increase in July.
August’s acceleration was increasingly driven by manufacturing, and electricity and gas supply.
Growth in manufacturing was led by electrical equipment, motor vehicles and other transport equipment, while electricity and gas supply remained strong on continued power generation.
Get RSM’s Market Minute commentary every morning. Subscribe now.
Mining and quarrying, however, contracted sharply and remained the weakest major industrial sector.
Industrial activity remained broad-based as 18 of 23 manufacturing industry groups expanded in August.
The strength in capital and intermediate goods suggests the August acceleration was not solely a function of electricity demand.
We expect industrial output to remain firm in the near term, although the pace is likely to moderate as higher crude oil prices and geopolitical tensions in West Asia may raise input costs for manufacturers and eventually weigh on production if energy prices remain elevated further.
We continue to view inflation as the primary consideration for the October monetary policy meeting. The August industrial data strengthens the case that the economy has sufficient underlying momentum to withstand tighter financial conditions if inflation risks persist.
Inside the data
- Manufacturing grew by 9.0%, marking the third consecutive month of growth of 8% or more.
- Electrical equipment output surged by 30.9%, the strongest manufacturing industry in August.
- Motor vehicle output increased by 25.2%, supported by passenger vehicles, commercial vehicles and auto components.
- Capital goods output rose by 16.9%, the fastest-growing use-based category.
- Electricity and gas supply grew by 12.3%, accelerating from 8.7% in July.
- Mining and quarrying contracted by 5.6%, the weakest-performing major sector.
- Consumer durables grew by 11.1%, while consumer non-durables grew 2.1%.
