India’s industrial activity, measured by the Index of Industrial Production (IIP), witnessed a contraction in August 2024, marking the first dip in 22 months. Data released by the National Statistics Office (NSO) revealed a 0.1% drop, largely due to weak performances in the mining and electricity sectors.
Key Contributors to the Decline
The mining and electricity sectors, which hold weights of 14% and 8% respectively in the IIP, were the primary drivers of this contraction. Mining activity fell by 4.3%, its first contraction since August 2022, while electricity production contracted by 3.7%. This marks the first decline in the electricity sector since April 2023.
Manufacturing Slows Down
Although the manufacturing sector, which carries the largest weight of 78%, didn’t see a full contraction, its growth was sluggish, expanding by only 1% in August. This is the slowest growth since October 2022, when manufacturing had contracted by 5.8%.
Consumer and Primary Goods Hit Hard
Among the different categories, primary goods saw the largest contraction of 2.6%, their first since February 2021. Consumer goods, particularly non-durables, also took a hit, contracting by 4.5%—the highest since October 2022.
High Base Effect Plays a Role
Some of the August contraction can be attributed to a high base effect, as IIP had expanded by 10.9% in August 2023. While capital, intermediate, and infrastructure goods showed growth, their momentum slowed significantly compared to July.
India’s industrial sector now faces the challenge of overcoming these dips and maintaining growth, especially in the face of global economic uncertainties.
