New Delhi: India's industrial output growth has reached a significant milestone, soaring to a 26-month high in December 2024, propelled by robust expansion in manufacturing and a notable rebound in mining and electricity sectors. This marks the second consecutive month where industrial growth has exceeded the 7% threshold, signaling strengthening economic momentum.
Strong Performance Across Key Sectors
Data released by the National Statistics Office (NSO) on Wednesday revealed that the index of industrial production (IIP) rose by an impressive 7.8% in December 2024. This figure surpasses the upwardly revised growth rate of 7.2% recorded in November and significantly exceeds the 3.7% growth observed in December of the previous year.
Manufacturing Leads the Charge
The manufacturing sector demonstrated particularly strong performance, growing at an annual rate of 8.1% in December compared to just 3.7% in December 2023. This substantial acceleration has been largely attributed to the positive impact of recent GST rate cuts, which have stimulated production across various industries.
Within the manufacturing sector, several industries recorded exceptional growth rates:
- Computer, electronic and optical products surged by 34.9%
- Motor vehicles, trailers and semi-trailers expanded by 33.5%
- Other transport equipment grew by 25.1%
Mining and Electricity Show Recovery
The mining sector exhibited a strong recovery, growing by 6.8% in December compared to 2.7% in December 2023. Similarly, the electricity sector maintained steady growth, rising by 6.3% during the month compared to 6.2% in the previous December.
Investment and Consumption Indicators Remain Robust
The capital goods sector, which serves as a crucial gauge of investment activity, continued to show strength with 8.1% growth in December, although this represents a slight moderation from the 10.5% expansion recorded in December 2023.
On the consumption front, both consumer durables and non-durables sectors demonstrated healthy performance:
- Consumer durables grew by 12.3% during the month compared to 8.1% expansion in December 2023
- Consumer non-durables surged by 8.3% in December, rebounding from a contraction of 7.1% in the same month last year
Expert Analysis and Outlook
Rajani Sinha, chief economist at ratings agency CareEdge, highlighted several supportive factors for the industrial growth. "On the investment front, infrastructure and construction goods continued to register healthy growth, supported by sustained capex at both the Central and state government levels," she noted.
Sinha further explained that "demand-side indicators also strengthened, with consumer durables and non-durables recording healthy output growth. Policy measures such as GST rationalisation, income tax relief, past RBI rate cuts and easing inflationary pressures remain supportive of the consumption outlook."
Future Challenges and Opportunities
Looking ahead, Sinha emphasized that "the upcoming budget will be pivotal in shaping domestic economic momentum amid heightened global headwinds." She identified several key factors that will influence industrial performance in the coming months:
- The direction of capex-related policies and their influence on private investment
- The lingering uncertainty around US tariffs, which remains an important risk to monitor
- Continued policy support for consumption and investment activities
The sustained industrial growth over consecutive months suggests that India's manufacturing and industrial sectors are gaining momentum, supported by favorable policy measures and improving domestic demand conditions. However, economists caution that maintaining this growth trajectory will require continued policy support and careful navigation of global economic challenges.
