India’s industrial output likely to grow 3.7 percent in October due to festive demand: Report

According to a report by Union Bank of India, India’s industrial production is likely to improve in October 2024 due to festive demand.

The report said that the Index of Industrial Production (IIP) increased by 3.7 percent year-on-year, which was 3.1 percent in September. However, this is much lower than the 11.9 per cent growth recorded in October 2023, which was driven by a low base effect.

“As indicated by the IIP, industrial production growth improved to 3.7 per cent year-on-year from 3.1 per cent in the previous month and 11.9 per cent in October’23,” it said.

The report also said that high-frequency indicators suggest that aggregate demand has regained strength during the festive season. Demand growth was supported by strong rural and urban consumption, improved production and spending patterns.

The core sector, which accounts for 40 per cent of the IIP, played a key role in this recovery, according to the report, growing by 3.1 per cent in October – a three-month high – compared to 2.4 per cent in September. The improvement was attributed to higher production in coal, steel and electricity.

However, the production of fertiliser, refinery products and cement saw a decline, while the production of crude oil and natural gas declined during the same period.

The report also said that manufacturing activity has shown signs of revival. The rise in auto production due to festive demand reflected the recovery in the sector. A positive change may be seen in consumer non-durable goods, which is a sign of increase in rural demand.

According to the November bulletin of the Reserve Bank of India (RBI), rural India emerged as a significant contributor to the demand recovery during the festive season. This was boosted by a sharp increase in Kharif crop production and optimism around the upcoming Rabi crop. E-commerce companies particularly benefited from this trend, reporting strong sales in rural markets.

Urban demand represented by consumer durables also increased during the festive period, although the pace remained weak compared to rural demand.

“We estimate that manufacturing IIP growth has improved due to festive season demand, as evidenced by auto production growth data,” the report said.

The findings highlight the important role of seasonal factors and rural consumption in shaping India’s economic recovery, with festive demand providing a much-needed boost to industrial activity in October.

Official data for October IIP will be released by the Ministry of Statistics and Program Implementation on December 12.