Loss of favourable base shrinks IIP growth to a 4-month low - IIP July-22 - Acuité Ratings

Chief Analytical Officer, Mr. Suman Chowdhury

GDP growth for FY23 revised down to 7.2% amidst global headwinds

India's Index of Industrial Production (IIP) registered a single-digit growth of 2.4% YoY in Jul-22 from 12.7% YoY in Jun-22. IIP growth print has been slowing since the one-year high of 19.6% recorded in May-22, primarily due to the taper of a favorable base. On a sequential basis, the index recorded a contraction of 2.75%, MoM, in Jul-22 from +0.51% in Jun-22 which can be partly attributed to the seasonal factor and the disruption to mining and construction activities due to the monsoon. Nevertheless, on a cumulative basis, IIP growth for Apr-Jul'22 stands at a healthy level posting an expansion of 4.24% as compared to the corresponding pre-pandemic period of FY20.

Going forward, Acuité expects the pace of IIP recovery to remain under pressure given the strong headwinds to global growth and therefore exports apart from the removal of the base factor advantage.

Acuité expects full-year GDP growth of 7.2% in FY23.

Says Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research "IIP growth print has been fairly misleading in the first quarter of FY23 given the base factor arising from the second wave impact over Q1FY22. This is set to get normalized from Q2 and we expect it to be moderate in the low single digits for the rest of the year. While there has been a significant recovery in the broader economy after the prolonged pandemic, the output in the consumer goods and the capital goods sectors still lag behind the pre-pandemic levels due to weak rural demand and the sluggishness in private sector CAPEX. While an expected pickup in domestic demand and the higher government CAPEX will be a positive for industrial output, it is likely to be partly offset by the slowdown in exports."

Source : Equity Bulls

Keywords

IIP July2022 GDP FY2023 Revision AcuiteRatings