data released by national statistics office ,NSO) showed on Tuesday that the Index of Industrial Production (IIP) rose 19.6% year-on-year in May, up from a revised 6.7% in April and lower than 27.6% in May 2021. The growth in the April-May period was 12.9. % compared with an expansion of 67.3% in the year-ago period.
The manufacturing sector grew by 20.6%, compared to an expansion of 32.1% in the year-ago period, while the power sector grew by 23.5% during the month, compared to a 7.5% growth in May 2021. The mining sector grew by 10.9% as compared to the growth. 23.6% in May 2021-22. The data is almost in line with PMI surveys, showing a strong pick-up in the critical sector following the devastating impact of restrictions imposed to contain the spread of COVID-19.
“The strong growth in industrial activity for the second month in a row boosts confidence in overall economic growth. While the growth data for May has been outpaced on a favorable basis, the gradual improvement in most categories is encouraging. IIP registers a growth of 1.7 per cent in May as compared to May 2019 (pre-pandemic period) Rajani SinhaChief economist of rating agency CareEdge.
“While the manufacturing sector, which accounts for the largest share of IIP, continues to improve, the continued weakness in the consumer non-durables segment is worrying. Some moderation in global commodity prices augurs well for the performance of the industrial sector in the times to come. However, the challenges of slowing global growth remain,” Sinha said in a note.
The capital goods sector, which is seen as a barometer for industrial activity, grew by 54% in May compared to a growth of 74.9% in May 2021, while the consumer durables sector grew by 58.5% compared to an expansion of 80.4% in the month. increased. year ago.
Some economists urged caution in interpreting May’s figures, saying the future trajectory of growth would depend on how consumption fares against a backdrop of stubborn inflation.
“The overall growth should be viewed with caution, even if the two-month cumulative performance is an impressive 12.9%. The future course will depend on how the consumption fares, which will be driven by inflationary trends,” Madan said. sabnavisChief Economist of Bank of Baroda.
“As households spend more on necessities, there may be a cut in non-discretionary spending as prices rise. This can be a major impediment to industrial development. Infra-based industries are likely to keep up with government capital expenditure going forward. But to survive, we also need to see an uptick in private investment, which is still weak.