IN: Industrial Production

Mon Feb 12 06:00:00 CST 2018

Actual Previous
Change Y/Y 7.1% 8.4%

India's industrial production index rose 7.1 percent on the year in December, easing from revised growth of 8.8 percent in November. The increase in November had been the strongest year-on-year growth in the index since June 2016 and despite the moderation in December, growth remains well above the relatively weak growth rates recorded previously throughout 2017.

The fall in headline year-on-year growth was mainly driven by the manufacturing sector. Manufacturing output, which accounts for almost 78 percent of the total index, grew by 8.4 percent on the year in December, down from a revised increase of 10.7 percent in October,. Other parts of the economy, in contrast, recorded moderately stronger growth in output, with the year-on-year change in mining output, which accounts for around 14 percent of the index, up slightly from a revised increase of of 1.1 percent to an increase of 1.2 percent, while electricity output, which accounts for around 8 percent of the index, grew by 4.4 percent on the year in November, up from a revised 3.9 percent in November.

In contrast to the slightly weaker growth in industrial production reported today, PMI survey data indicated that conditions in the manufacturing sector improved in December. More recent PMI data released earlier in the month, however, showed a decline in the manufacturing survey's headline index in January, though it remains at relatively strong levels.

Industrial production measures the physical output of the nation's factories, mines and utilities. Data are not seasonally adjusted and the main is on the annual growth rate of total industrial production and, within that, manufacturing output. The report is usually released around six weeks after the end of the reference month.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that will not lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.

The index is a quantitative index with the production of the items being expressed in physical terms. The Index is compiled by taking into account the quantities of items produced during the current month, compared with the average monthly production in the base year. Selection of items is based on the total production of the items as the primary (main) product as well as secondary (by) product. Data are available monthly within six weeks of reference month.