Ajit Karn
Friday’s Ministry of Statistics and Programme Implementation data showed that India’s factory output, as measured by the Index of Industrial Production (IIP), increased by 4.3% year-over-year in December. Nevertheless, the growth rate has slowed since November, when it stood at 7.3%.
“IIP growth slowed to 4.3% in December from 7.3% in November due to a sharp moderation in manufacturing. A broad-based slowdown was evident in the manufacturing sector, led by computers, apparel, and tobacco, according to Aditi Gupta, economist at Bank of Baroda.
The National Statistical Office (NSO) data revealed that the manufacturing sector’s output increased by 2.6% in December 2022.
During the month under review, mining output increased by 9.8 percent and power generation increased by 10.4 percent.
According to the Index of Industrial Production (IIP), industrial growth in 2021-22 was 11.7% over the same period the previous year. In response to a question in the Parliament on February 8, Minister of State for Commerce and Industry Som Parkash stated that the annual average growth rate of IIP between 2009 and 2014 (base year: 2004-05) and 2014 to 2019 (base year: 2011-2012) was 3.4% and 3.2%, respectively.
According to the ministry, the government has taken numerous measures to improve industrial performance. These include the introduction of the Goods and Services Tax (GST), a reduction in corporate tax, interventions to improve the ease of doing business, measures to reduce the compliance burden, policy measures to boost domestic manufacturing through public procurement orders, the Phased Manufacturing Programme (PMP), and reforms to FDI policy.
“Within use-based, while output of primary goods accelerated to 8.3% in Dec’22 from 4.8% in Nov’22, output in all other segments declined,” Gupta added.
The ministry stated in their press release that the growth is primarily driven by the SME sector due to the government’s support for the sector. The Emergency Credit Line Guarantee Scheme (ECLGS), with a provision of Rs 3 lakh crores that has been increased to Rs 5 lakh crores, is a fully-guaranteed credit line for monitoring lending institutions.
“An infusion of Rs 20,000 billion in equity support through subordinate debt has been made available to distressed MSMEs. Fund of Funds established to infuse Rs.50,000 crore worth of equity into the MSME sector by establishing Rs.10,000 crore Corpus Fund,” stated the release.
While the government noted that the MSME sector is driving growth, economists believe that external headwinds are responsible for the slowing growth rate.
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According to economists, IIP growth in December came in at 4.3%, which is less than the 5% that was anticipated. With this growth of 4.3%, the overall growth for the nine-month period from April to December is 5.4%.
