Crisil Research expects India’s industrial activity to gear up

India's industrial activity is expected to gather pace in the coming months owing to a gradual pick-up in consumption as well as investment demand

PGurus Newsdesk

February 20, 2022

India's industrial activity is expected to gather pace in the coming months owing to a gradual pick-up in consumption as well as investment demand

India’s industrial activity expected to pick up: Crisil Research

Indian industrial activity is expected to gather pace in the coming months owing to a gradual pick-up in consumption as well as investment demand.

Crisil Research said, “While there was an improvement in the momentum i.e., sequential or on-month movement of industrial activity in December – likely reflecting some easing of raw material supply disruption – it was not very robust. Softness in both consumption and investment demand kept industrial, especially manufacturing, growth subdued.”

Notably, the latest Index of Industrial Production (IIP) printed at 138 (index reading) in December 2021, representing a 0.4 percent on-year growth, down from 1.3 percent growth in November.

Besides, the slowdown in on-year IIP growth to 0.4 percent in December, from 1.3 percent in November, reflected weaker manufacturing activity which, at 77.6 percent, is the largest component of IIP.

Segment-wise, manufacturing IIP declined 0.1 percent on-year in December, whereas mining and electricity grew 2.6 percent and 2.8 percent, respectively, containing the decline in overall IIP growth.

“To be sure, the slowdown is also the result of a high base (as IIP had risen in December 2020 over November 2020). The weakness in manufacturing growth was in sync with the Purchasing Manager’s Index, which eased to 55.5 in December from November‘s 57.6. That said, strong export performance did some counter-balancing.”

Furthermore, the use-based classification of IIP suggests weakness in both investment and consumption demand.

However, Crisil Research, said: “Industrial growth fell in January due to rising Omicron cases. This could also have slowed demand a bit and caused some logistical disruptions.

It added, “Beyond that, going ahead, industrial activity is expected to gather pace for two reasons. One, raw material shortages are slowly getting addressed, and consumption and investment demand are expected to gradually pick up.”

The second reason it cited was that the government is expected to step up Capex, which should give a lift to the manufacturing of infrastructure-related products and services. “That said, high commodity prices and their impact on manufacturing activity will remain monitorable in the road ahead,” it said.

[With Inputs from IANS]

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