IN: Industrial Production

Mon Mar 12 07:00:00 CDT 2018

Actual Previous
Change Y/Y 7.5% 7.1%

India's industrial production index rose 7.5 percent on the year in January, up from 7.1 percent in December. This is the third consecutive month of relatively strong growth in industrial production after a period of weakness following the introduction of a new goods and services tax in mid-2017.

Stronger headline year-on-year growth was driven by the manufacturing and electricity sectors. Manufacturing output, which accounts for almost 78 percent of the total index, grew by 8.7 percent on the year in January, up from a revised increase of 8.5 percent in December, while the year-on-year change in electricity output, which accounts for around 8 percent of the index, picked up from a revised 4.4 percent to 7.6 percent. In contrast, mining output, which accounts for around 14 percent of the index, grew by just 0.1 percent on the year in January, down from a revised 1.1 percent increase in December.

In contrast to the slightly stronger growth in industrial production reported today, PMI survey data indicated that conditions in the manufacturing sector weakened in January. More recent PMI data released earlier in the month showed a further small decline in the manufacturing survey's headline index in February, 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.