Industrial output growth hits 5-month high of 5.1%, Pg1

Key Highlights:

• India's industrial activity grew by 5.1% in May, marking a five-month high.
• The Ministry of Statistics and Programme Implementation released the data, indicating broad-based growth.
• The Index of Industrial Production (IIP) now uses a new base year of 2022-23.
• The calculation methodology for IIP has shifted from Wholesale Price Index (WPI) to Producer Price Index (PPI) for some value-based outputs.
• Manufacturing sector expanded by 5.5%, while electricity and gas supply recorded a 9.9% increase.

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Detailed Insights:

• The 5.1% growth was primarily driven by stronger performances in manufacturing, electricity, capital goods, and consumer goods sectors.
• The updated IIP series incorporates new data sources, aiming for more accurate representation of industrial output.
• The change from WPI to PPI in IIP calculation is expected to cause revisions in growth figures across segments and potentially impact GDP data.
• Manufacturing growth is attributed to a revival in consumption, with consumer durables growing by 7.2% and non-durables by 3.6%.
• The auto sector, followed by computers and other electronic goods, were key contributors to the growth in consumer durables.
• The significant increase in electricity and gas supply is linked to a delayed monsoon and higher temperatures, boosting demand.
• The mining and quarrying sector experienced a contraction of 1.6%, marking its fifth consecutive month of decline.

Key Concepts Involved:

• Index of Industrial Production (IIP): An index that measures the changes in the volume of production of industrial products in an economy.
• Wholesale Price Index (WPI): An index that measures the average change in the prices of goods at the wholesale level.
• Producer Price Index (PPI): An index that measures the average change over time in the selling prices received by domestic producers for their output.
• Base Year: A reference year for comparison in economic indices, chosen for its economic stability.
• Gross Domestic Product (GDP): The total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.