IIP: Rajani Sinha - Chief Economist, CareEdge Ratings

15 Jan 2024 , 11:42 AM

“As expected, the IIP growth decelerated sharply to 2.4% in November from the previous month’s 11.6% primarily on account of a normalizing base. While an unfavorable base resulted in a broad-based growth moderation, month-on-month contraction seen in the electricity and manufacturing sectors further constrained the overall IIP growth. Within the use-based components, the concerning aspect is the continued weakness seen in consumer goods component and the sharp deceleration in infra-related segment. Furthermore, the contraction witnessed in capital goods output also came as a negative. Going ahead, we expect growth numbers in the coming months to be impacted by a further normalization of the base.

Going ahead, a durable and broad-based improvement in consumption demand is a key monitorable. It remains to be seen if the pre-election spending can provide the much-needed impetus to rural demand. On the external front, though the global economy has remained largely resilient in the face of several headwinds, we maintain a cautious outlook amid weakness in exports. Given this background, a durable recovery in domestic demand remains critical for the trajectory of industrial activity going ahead.”