India's industrial growth hits a three-month low at 5.8% in September

India's industrial output growth witnessed a notable slowdown, sliding to a three-month low of 5.8 per cent in September. Data released on the eve of Diwali shows that this decline comes on the heels of a 14-month high recorded in August at 10.3%.

Manufacturing growth, a significant component of the industrial sector, experienced a considerable drop, halving from 9.3 per cent in August to 4.5 per cent in September.

Analysts point to weak consumption demand, evident in the sluggish performance of consumer durables, which saw a mere 1 per cent increase in production. Similarly, non-durable growth stood at 2.7 per cent in September, despite benefiting from a favourable base effect from the previous year when both segments had witnessed declines of 5.5 per cent and 5.7 per cent, respectively.

The moderation in growth also extended to the electricity and mining sectors, with growth rates clocking in at 9.9 per cent and 11.5 per cent, respectively. On a more granular level, when spliced based on usage, primary goods demonstrated the fastest growth at 8%, although it marked a cooling from the 12.4 per cent seen in August. Infrastructure and construction goods rose by 7.5 per cent, while capital goods grew by 7.4 per cent. Intermediate goods output grew at 5.8 per cent

The manufacturing sector, which had shown resilience in August with only seven out of 23 sectors contracting, faced a broader setback in September. Nine segments experienced drops in output, led by a substantial decline in the furniture sector at -20.2 per cent.

The apparel segment also contracted significantly, with a decrease of 17.9 per cent, worse than the 17.1 per cent recorded in August. Computers and electronics output fell by 8.9 per cent, and the chemical contraction widened from 4.3 per cent in August to 5.6 per cent in September. The "Other Manufacturing" catch-all category witnessed a notable fall of 13.5 per cent.

Despite the industrial output being up 6 per cent in the first half of the year, with mining up 8.7 per cent, electricity 6.1 per cent, and manufacturing 5.7 per cent, the September figures have raised eyebrows. Economists had anticipated sharper growth in September's Index of Industrial Production (IIP).

Aditi Nayar, Chief Economist at ICRA, who had estimated an 8 per cent uptick, attributed the unexpected figures to an unfavourable base, a shift in the festive calendar, and excess rainfall in September.

She noted that the moderation was broad-based across all sub-sectors and use-based categories, with consumer goods' tepid performance leading to manufacturing trailing behind mining and electricity in September.