Explainer: What led to India's factory output growth in April?

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Published : Jun 11, 2022, 10:36 PM IST

Explainer: What led to India's factory output growth in April?

In a relief for the policy makers and the government, this is for the first time in eight months when all the six segments of the industrial sector as per the use-based classification registered a positive growth.

New Delhi: India’s factory output, measured as the Index of Industrial Production (IIP) registered a healthy growth of over 7 per cent in April this year despite a very high base of April last year as strong performance in the mining and electricity sector propelled the factory output to a healthy 7.1 per cent.

In a relief for the policy makers and the government, this is for the first time in eight months when all the six segments of the industrial sector as per the use-based classification registered a positive growth. The data of IIP growth in April this year is the first macro-economic data of economic growth for the first month of the current financial year which comes in the wake of provisional GDP growth data for the last financial year where the country’s economic growth has been estimated at 8.7 per cent as per the data released by the National Statistical Office (NSO) on May 31.

What is driving factory output growth?

While the overall index of industrial production registered a growth of 7.1 per cent in April, the two segments driving this growth are mining and electricity sectors. While the mining sector grew by 7.8 per cent in April on a year-on-year basis, the electricity sector registered a strong growth in double digits in April as it clocked 11.8 per cent year-on-year growth during the same month.

Also read: India is the fastest growing economy among G-20 nations: PM Modi

In addition to these two sectors, the manufacturing sector, which was badly hit during the Covid-19 lockdowns, also registered a healthy growth of 6.3% in April this year, which is also eight months high. As per the use-based classification of the factory production, all the six segments registered a positive growth despite the high base of April last year. Of these eight sectors, four sectors, capital goods and primary goods registered double digit growths at 14.7 per cent and 10.1 per cent respectively. Other two sectors -- consumer durables and intermediate goods -- also showed healthy growth at 8.5 per cent and 7.6 per cent respectively in April this year as against their performance during the same month last year.

Capital goods sector benefits from infra push

Economists believe that the double-digit growth in the capital goods sector is due to the infrastructure push given by the Centre as it has allocated a record Rs 7.5 lakh crore for capital account in the current financial year and a big part of this allocation has been front-loaded. The positive results of this infra push are visible from the factory output data for the first month of the current financial year.

Secondly, the consumer durables segment which includes production of white goods such as fridge, washing machines, air conditioners among other such consumer goods showed a positive growth after a gap of six months which showed a strong consumer demand. However, all segments of the industrial production have not shown the same strong performance in April. For instance, the consumer non-durables segment registered a marginal growth of just 0.3% while the construction goods segment registered a growth of 3.8%.

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