The Index of Industrial Production (IIP) reflects the growth rate in the core sectors of an economy, encompassing manufacturing, mining, and electricity. Additionally, it encompasses basic goods, intermediate goods, and capital goods. This index data is utilised by governments and policymakers for decision-making and policy formulation.
What’s Happening?
Following a significant decline in November 2023, the Index of Industrial Production (IIP) has rebounded. December 2023 data reveals a rise to 3.8% from the previous 2.4% in November 2023.
Overall monthly output across core sectors, including manufacturing, electricity, and mining, increased in December 2023 compared to the previous month. However, in contrast to October 2023’s 11.6% surge in industrial production, there appears to be a slowdown in India’s core sectors.
The manufacturing sector’s core industries encompass steel, fertilisers, and chemicals, while the mining sector includes coal, crude oil, natural gas, and refinery products, with electricity representing the third core sector.
Annual Overall IIP Growth for the Past 10 Years
Over the last decade, industrial production in India has shown significant growth. The annual IIP index climbed from 3.3 in 2012-13 to 7.8 in 2022-23. While the index exhibited stable and positive growth throughout the years, with the exception of the pandemic year, there was a drop to 0.4 in 2019-2020 and a negative decline to -6.4 in 2020-21. However, the Indian economy rebounded in 2021-2022, with the IIP index growing by 10.4% during that period.
What’s in it for Investors?
The IIP index holds significance for investors in guiding their investment decisions. Investors can assess the performance of core sectors before investing in stocks within these sectors. Understanding sectoral performance, as facilitated by the Index of Industrial Production, is crucial for investment decisions. It also aids in monitoring the performance of existing holdings and facilitates comparison of returns.
What’s Next?
As per IMF projections, the Indian economy is expected to grow by 6.5% by 2024, with core sectors anticipated to exhibit similar growth rates. Moreover, the manufacturing sector aims to contribute 25% to the GDP by 2025.
Conversely, the electricity sector may witness substantial investment in renewable energy generation. APAC is projected to invest $3.3 trillion over the next decade, with India poised to receive a significant portion of this investment.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
*Disclaimer: Teji Mandi Disclaimer
