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Dec-22 IIP: Remains resilient

13 Feb 2023



  • India’s growth print in industrial index of production (IIP) moderated to 4.3%YoY in Dec- 2022 after touching a five-month high of 7.3%YoY in Nov-22, in line with market consensus pegged at 4.5%YoY.
  • However, the sequential momentum was strong at 5.3%MoM in Dec-22, building on the 6.3%MoM expansion recorded in the previous month and broadly in line with the average expansion of 6.7%MoM usually seen in the month of December. This reflects a gradual recovery in industrial activity after a sluggish H1FY23.
  • A healthy IIP data for Dec-22 was accompanied by improvements in the breadth of industrial activity with all 3 sub-sectors of manufacturing, mining and electricity contributing to the resilient momentum in headline index.
  • Lower global commodity prices, government’s aggressive capex disbursal, healthy harvest in the last kharif and the current rabi season with improving capacity utilisation at a macro level ought to be playing a supportive role.
  • However, we also acknowledge escalating downside risks from the external side amidst weakening of growth impulses due to tightening of global financial conditions and continued geopolitical uncertainty.
  • In addition, lingering weakness in manufacturing exports, sluggishness in the pace of private capex recovery along with expectations of a moderation in urban consumption pose concerns about the strength of the recovery and could weigh on FY24 growth.
  • Overall, while we continue to maintain our GDP growth outlook at 7.0% for FY23, we expect momentum to moderate to 6.0% in FY24.

In line with the expectations of a moderation in the print, growth in India’s IIP eased from its 5-month high of 7.3% YoY (revised up from 7.1% earlier) in Nov-22. Despite the moderation, the 4.3% YoY print for IIP in Dec-22 is healthy compared to the series average (i.e., since Apr-13) of 3.8%.

A granular look:

  • While per se the sequential momentum for IIP was strong at 5.3%MoM in Dec-22 (building on the robust 6.3%MoM expansion recorded in the previous month), it was slightly lower than the average expansion of 6.7%MoM (pre pandemic series average) usually seen in the month of December.

  • As per sectoral classification, momentum in the headline index was driven by sequential expansion in all three-subsectors. The momentum was strong for both Mining (7.7%MoM) and Electricity (7.6%MoM). In particular, the electricity sector has been a silent performer with an output CAGR of 4.1% over the last three years.

  • Within the 23 sub-sectors of manufacturing, 18 registered a sequential expansion while 5 saw a sequential contraction. The top 3 industries showing expansion in sequential activity were ‘Other Manufacturing’ (+20.0% MoM), Coke and Refined Petroleum Products (+13.5% MoM) and Printing and Reproduction of Recorded Media (+12.2% MoM). On the other hand, the bottom 3 industries in terms of sequential activity were ‘Other Transport Equipment’ (-18.8% MoM), Computer, Electronic & Optical Products (-7.8%MoM), and Motor Vehicles, Trailers and Semi-Trailers (-4.3%MoM).

  • On use-based classification, sequential momentum in Dec-22 was led by Primary Goods (9.2% MoM) and Consumer Non-Durables (7.4% MoM). On the other hand, there was drag on headline momentum from Consumer Durables (-2.2% MoM) and Capital Goods (0.2% MoM).

  • Beyond the monthly volatility in the IIP figure, the growth in output in Apr-Dec’22 stands at 5.4% vs that in Apr-Dec’21 and is also 6.0% higher than the pre-pandemic Apr-Dec’19.


The post pandemic recovery in IIP continues to remain uneven. This recovery has been driven by the two broad sectors of Infrastructure & Construction Goods along with Primary Goods. On the other hand, Consumer Durables sector is yet to achieve its pre pandemic level of output.

Having said so, we do note that on consolidated basis, the headline IIP growth for Q3 FY23 improved to 2.4% YoY from 1.6% in Q2 FY23. In our opinion, this highlights the combined impact of pent-up and festive season demand and underscores the domestic economic resilience despite the pressure from high inflation, gradual tightening of monetary conditions, and geopolitical uncertainty.

.Accompanying the steady growth in industrial activity, a good kharif and an expected healthy rabi harvest, strength in high frequency lead indicators along with central government’s consistent focus on pushing through capex clearly seems to support the growth outlook over the remainder of FY23. The outperformance of economic activity in Dec-22 was visible in some of the other proxy indicators like PMI, Core Output, E-Way Bills, and Automobile Production.

Having said so, we acknowledge escalating downside risks from external side amidst weakening of global growth impulses due to tightening of global financial conditions, and still simmering geopolitical uncertainty. While the IMF revised up its forecast for World GDP growth by 20 bps in 2023 owing to easing Covid restrictions in China and moderating global inflation pressures, it continues to maintain its expectation of 50 bps deceleration in momentum vis-à-vis 2022 (global growth is expected to decelerate to 2.9% in 2023 from 3.4% in 2023).

Recent weakness in merchandise exports and continued sluggishness in the pace of private capex recovery are downside risks to growth in industrial activity from a near term perspective. Although urban consumption is still holding up, the rapid pace of monetary tightening undertaken by the RBI since Apr-22 may moderate growth impulses as the transmission in interest rates catches up.

Taking these factors into account and some loss of the base advantage, we expect growth to moderate to 6.0% in FY24 from 7.0% in FY23.

Says our Chief Analytical Officer, Suman Chowdhury “ The strong sequential index print in Nov’22 and Dec’22 reflects a steady industrial recovery after the lack of momentum witnessed in H1FY23. One of the key drivers of the IIP has been the infrastructure and construction goods where the output has recorded a 4.5% CAGR over the last three years (Apr-Dec) and this is consistent with the uptick in public capital expenditure during this period. But clearly, the consumer goods sector has dragged down the IIP – consumer durable output in particular is still 6.3% below the pre-pandemic level output in Apr-Dec'22 while the consumer non-durable output has barely exceeded the latter by 0.9%. In our opinion, this continues to exhibit the overall weakness in rural demand and the deep seated impact of the pandemic on the rural economy.”


Table 1: IIP growth at a glance

Chart 1: Barring consumer durables, all sectors above the pre pandemic levels