India's Factory Production Sees February Increase, but Energy Price Pressures Mount
India's Industrial Output Sees Healthy Growth in February, Despite Rising Energy Costs
India's industrial output grew 5.2% year-on-year in February, according to a report by Crisil, marking a slight increase from the 5.1% growth recorded in January. The Index of Industrial Production (IIP) was driven by a stronger performance in manufacturing, which grew 6% compared to 5.3% in January.
A breakdown of the IIP growth shows that while manufacturing was a key driver, other sectors such as electricity and mining experienced a slowdown. Electricity growth slowed to 2.3% in February from 5.1% in January, while mining growth declined to 3.1% from 4.3% in the same period.
| Sector | February IIP Growth | January IIP Growth |
|---|---|---|
| Manufacturing | 6% | 5.3% |
| Electricity | 2.3% | 5.1% |
| Mining | 3.1% | 4.3% |
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Manufacturing has been the key driver of industrial growth in India, supported by segments such as infrastructure, construction, and capital goods. However, the report noted that a combination of higher prices and tighter supply of critical inputs due to the ongoing conflict in West Asia has imposed downside risks to industrial output.
Energy costs have become a growing concern for manufacturers, with rising input costs emerging as a key pressure point. The report noted that uneven pricing power across firms may limit their ability to fully pass through costs. Gas availability constraints could also disrupt output in sectors dependent on such inputs, with supplies being rationed.
Despite these headwinds, domestic demand continues to provide some cushion to India's industrial output. The report noted that a healthy domestic demand scenario provides a crucial buffer currently. However, Crisil cautioned that prolonged geopolitical uncertainties, particularly in West Asia, could impact investment decisions and delay recovery in private sector spending.
Overall, while manufacturing-led growth has kept industrial output resilient, rising energy prices and supply-side constraints remain key risks going forward.
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
More in Economy
Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
MoSPI Releases Uniform Norms for DDP Estimates with 2022-23 Base Year
