India’s Industrial Activity Boosted by Domestic Consumption and Monsoon: CRISIL Report
Industrial activity in India is expected to grow this fiscal year, supported by domestic consumption and a favorable monsoon, according to a report by CRISIL. Private consumption, which had weakened to 4% last fiscal year, is anticipated to improve.
Monsoon and Agriculture
The normalization of the monsoon in July and increased kharif sowing are expected to boost agricultural output. This should help ease food inflation and enhance discretionary spending.
Industrial Production
The Index of Industrial Production (IIP) increased by 5.9% year-on-year in May, up from 5.0% in April. This growth was driven by higher outputs in manufacturing and electricity, although mining output growth slowed slightly. Consumption-oriented sectors were the main drivers of this increase in May.
Challenges and Outlook
Despite the positive outlook, the urban economy might face challenges due to tighter credit conditions. The Reserve Bank of India’s consumer confidence index indicates softening prospects for urban consumption. The upcoming Budget will play a crucial role in determining the extent of the central government’s support for growth.
Global Trade and GDP
Globally, an improved trade outlook is expected to support exports, although uneven growth in major economies could pose challenges. Consequently, GDP growth is expected to slow down to 6.8% this fiscal year, compared to 8.2% last year.
Sectoral Performance
The IIP growth was driven by electricity (13.7% year-on-year) and manufacturing (4.6%), while mining growth slowed slightly (6.6%). Consumer durables, primary goods, and consumer non-durables saw significant growth, while infrastructure and construction goods, capital goods, and intermediate goods experienced slower growth.
Overall, the fiscal year is expected to see continued growth in industrial activity, supported by improving domestic consumption and a favorable monsoon.
