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Jan-23 IIP: Gains strength

13 Mar 2023



  • India’s industrial activity rose to 5.2% YoY in Jan-23 from 4.7% in Dec-22, marginally beating market consensus.

  • Sequential momentum in IIP was moderately strong at 0.8% MoM in Jan-23, building on the 5.7% MoM expansion recorded in the previous month, and broadly in line with the average expansion of 0.7% MoM usually seen in the month of January.

  • The healthy momentum in headline IIP index for Jan-23 was accompanied by improvement in the breadth of industrial activity across all 3 sub-sectors.

  • Government’s strong capex disbursals, recovery in auto sales, and improving capacity utilization at a macro level ought to have played a supportive role.

  • However, weakening of growth impulses due to tightening of global financial conditions and persistent geopolitical uncertainty continue to be a matter of concern and has started to reflect through a weakness in manufacturing exports.

  • In addition, a subdued recovery in the pace of private capex along with expectations of a moderation in urban consumption pose concerns about the strength of the recovery in FY24

  • Overall, we maintain our GDP growth forecast of 7.0% in FY23 and 6.0% for FY24.

India’s IIP rose to 5.2% YoY in Jan-23 from 4.7% YoY (revised up from 4.3% reported earlier) in Dec-22. The headline print marginally beat market consensus, with most consensus estimates expecting a recovery of about 5.0%.

A granular look:

  • Sequential momentum for IIP came in moderately strong at 0.8% MoM in Jan-23 (building on the robust 5.7% MoM expansion recorded in the previous month), and broadly in line with the average expansion of 0.7% MoM usually seen in the month of January.

  • As per sectoral classification, momentum in the headline index was driven by sequential expansion in all three-subsectors. Momentum was particularly strong for Electricity (4.0% MoM) and Mining (2.6% MoM).

  • Within the 23 sub-sectors of manufacturing, 12 registered a sequential expansion while 11 saw a sequential contraction. The top 3 industries showing expansion in sequential activity were Transport Equipment (12.7% MoM), Computer, Electronics & Optical Products (11.1% MoM), and Motor Vehicles & Trailers (9.8% MoM). The bottom 3 industries in terms of sequential activity were Wood Products (-16.5% MoM), Printing Material (-13.1% MoM), and Fabricated Metal Products ex Machinery and Equipment (-11.8% MoM).

  • On use-based classification, sequential momentum in Dec-22 was led by Capital Goods (5.2% MoM) and Primary Goods (3.2% MoM). On the other hand, there was drag on headline momentum from Consumer Non-Durables (-5.7% MoM).

  • In annualized terms, production of consumer durables remained in contraction for second consecutive month.


The higher than anticipated expansion in Jan-23 IIP is accompanied by an improvement in the breadth of industrial activity, driven by two broad sub-sectors of Capital Goods and Primary Goods. On the other hand, Consumer Durables sub-sector is trailing its pre pandemic level of output by around 7%.

Accompanying the growth in industrial activity, strength in high frequency lead indicators along with central government’s consistent focus on pushing through capex clearly seems to be supporting the growth outlook over the remainder of FY23. The outperformance of economic activity in Jan-22 was visible in some of the indicators like PMI, Core output, E-Way Bills, and Automobile Production.

Having said so, we acknowledge escalating downside risks from external side 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 for 2023 to 2.9% owing to easing Covid restrictions in China and moderating global inflation pressures, it marks a 50 bps deceleration vis-à-vis 2022 growth of 3.4%

Recent weakness in domestic merchandise goods exports and continued sluggishness in the pace of private capex recovery are downside risks to industrial activity from a near term perspective. Although urban consumption is holding up, rapid pace of monetary tightening undertaken by the RBI since Apr-22 is anticipated to moderate growth impulses as lending rates start catching up. In addition, predictions of a heat wave in Mar-23 ahead of the rabi harvest and early indication of a below-normal Southwest monsoon due to El Nino phenomenon could dampen growth prospects.

Taking these factors into account, we expect GDP growth to slow down to 6.0% in FY24 from 7.0% in FY23.

Says Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research “IIP delivered a healthy growth print of 5.2% YoY and 0.8% MoM for Jan-23, reflecting a good momentum build-up in industrial activity towards the fiscal year-end. However, the uptick has been primarily driven by a relatively stronger growth in mining and the electricity sector with manufacturing showing a moderate growth of 3.7% YoY and 0.1% MoM respectively. Weaker exports continue to be a drag on the manufacturing sector. The mining sector has possibly benefitted from higher production of coal with electricity generation witnessing a seasonal growth in January due to higher agricultural demand. From a usage perspective, the uptick in capital goods and construction at 11.0% and 8.1% YoY is encouraging but its sustainability needs to be seen. What remains a dampener is the consumer goods output, essentially reflecting weaker rural demand. For the cumulative 10 month period (Apr-Jan’23), consumer durable production grew by only 2.2% while there was a contraction in output of 0.4% in non-durables.”


Table 1: IIP growth at a glance

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