India's industrial growth accelerates to 5.1 per cent in May
New Delhi, June 28
India's industrial production clocked a 5.1 per cent growth in May this year compared to the same month of the previous year on the back of a strong growth in the manufacturing sector and a surge in the electricity & gas supply sector during the month, according to the new series data released by the Ministry of Statistics on Monday.
The industrial growth rate accelerated in May from 4.9 per cent in April.
The manufacturing sector, which accounts for more than three-fourths of the index of industrial production (IIP), posted an impressive 5.5 per cent growth during May compared to the same month of the previous year. The sector plays a key role in providing quality jobs to the young graduates passing out from the country's engineering institutes and universities.
Within the manufacturing sector, 16 out of 23 industry groups have recorded a positive growth in May over the same month last year. The top three positive contributors for the month in this segment are manufacture of motor vehicles, which recorded a 14.5 per cent growth, manufacture of electrical equipment ( 20.8 per cent), and manufacture of basic metals ( 4.6 per cent).
The electricity and gas supply sector recorded a 9.9 per cent increase during May while water supply, sewerage & waste management posted a 5.5 per cent growth.
However, the mining sector proved to be a laggard, posting a negative growth of (-) 1.6 per cent during the month.
The figures on use-based classification show that the production of capital goods, which comprise machines used in factories, jumped by a robust 12.9 per cent in May this year. This segment reflects the real investment taking place in the economy, which has a multiplier effect on the creation of jobs and incomes going ahead.
There was also a 7.2 per cent increase in the production of consumer durables such as electronic goods, refrigerators, and TVs during April, reflecting the higher consumer demand for these items amid rising incomes. Consumer non-durables such as soaps and cosmetics posted a 3.6 per cent growth during the month.
The infrastructure and construction goods sector also recorded a growth of 5.9 per cent during the month, driven by the government's big-ticket investments in highways, ports, and railway projects which create large-scale employment and drive up the overall economic growth rate.
The Ministry of Statistics and Programme Implementation (MoSPI) has decided to adopt the Output Producer Price Index (Output PPI) as a deflator in place of the Wholesale Price Index (WPI) for item groups for which output is collected in value terms. This affects 234 out of the 463 item groups in the IIP basket, representing 36.02 per cent of the total index weight, the official statement said.
The ministry has now revised and released the entire IIP 2022-23 series with Output PPI, and it supersedes the earlier WPI-based IIP 2022-23 series released on June 1, the statement said.
The ministry had released the new series of the All India Index of Industrial Production (IIP) with base year 2022-23 on June 1, using the WPI as the deflator. Subsequently, the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, released the Output PPI series with base year 2022-23 on June 15. As Output PPI is a new and important indicator for capturing producer-level prices, it has significant implications for compiling IIP.
MoSPI said the transition from the WPI to the Output PPI assumes significance because a part of industrial production in the IIP is reported in value terms. Out of the 463 item groups included in the IIP basket, 234 item groups, accounting for 36.02 per cent of the total weight, are compiled using value-based production data.
Other reasons for adopting the new series are that Output PPI provides a more granular price structure than the WPI. For value-based items, use of Output PPI will improve the estimation of real output; adoption of output PPI is in line with international best practices and the recommendation of the Technical Advisory Committee (TAC) on the base revision of IIP.
Besides, such major changes in the IIP series can be accommodated only at the time of base year revision. As IIP is an important input in the estimation of quarterly Gross Domestic Product (GDP), it will facilitate eventual adoption of PPI-based volume estimation methods in the National Accounts, the statement added.
MoSPI has now decided to discontinue the use of WPI and has adopted the Output PPI as the deflator for the new IIP series (Base: 2022-23).
— IANS
Reader Comments
Finally some positive news! The 12.9% jump in capital goods means factories are investing in new machines. That should create more jobs down the line. Also happy to see consumer durables up 7.2% – people are buying more TVs and fridges, which shows rising middle-class spending power. Government's infrastructure push is working, but need to watch inflation.
Good data but I'm skeptical. The switch from WPI to Output PPI for deflating IIP seems like a technical adjustment that could change how growth is measured. Hope it's more accurate and not just window dressing. The real test is whether this translates to better wages for workers and not just corporate profits.
As someone working in the electrical equipment sector, I can confirm the 20.8% growth is real. Our factory is running at full capacity and we've hired more people this quarter. But small businesses in my hometown still struggle with high power costs and red tape. Need policies that help MSMEs too, not just large manufacturers.
I'm an American following Indian economic data. The 5.1% growth is solid but the mining contraction is a concern for energy security. The shift to Output PPI is a smart move for better accuracy, aligning with international standards. Keep an eye on consumer non-durables at 3.6% – that suggests rural demand might be lagging urban areas.
The 5.5% growth in manufacturing is promising but let's not ignore quality. I've seen engineering graduates struggling to find jobs matching their skills. The motor vehicle boom is good
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