India’s manufacturing sector is expected to maintain its growth momentum, supported by stronger exports and signs of improvement in the investment cycle, according to an ICICI Bank Research report.
However, the report cautioned that a below-normal monsoon could affect rural demand and put pressure on overall consumption, particularly in the fast-moving consumer goods (FMCG) segment.
Manufacturing Growth Remains Strong
Exports are expected to remain an important support for India’s manufacturing sector in the coming months. At the same time, rising power demand is providing a positive signal for the investment cycle as capital expenditure begins to pick up.
ICICI Bank Research noted that while weaker rural demand could affect consumption, stronger exports may continue to support manufacturing activity. Rising power demand is also being viewed as a positive indicator as investment activity shows signs of strengthening.
Industrial Production Rises 8% in August
India’s industrial production increased 8% year-on-year in August, compared with 7.4% growth recorded in July.
Manufacturing output grew 9% during the month, while electricity production increased 12.3%. Mining, however, remained under pressure and contracted 5.6%.
The improvement in manufacturing was spread across several sectors, indicating support from both domestic and external demand. According to ICICI Bank, 14 of the 23 manufacturing sectors recorded faster growth in August.
Electrical equipment led the expansion with 30.9% growth. Other transport equipment and motor vehicles increased 25.3% and 25.2%, respectively. Computer, electronic and optical products also recorded strong growth of 19.3%.
Investment Cycle Shows Signs of Improvement
The investment cycle is also showing signs of gaining strength. Capital goods production increased 16.9% in August, supported by government infrastructure spending and improving capital expenditure by private companies.
Infrastructure and construction goods recorded 6.4% growth during the month, adding to the indications of stronger investment activity.
Power generation also provided a positive signal. Electricity generation increased 13.3%, while renewable power generation rose 15.4%. ICICI Bank, however, noted that part of the increase in power demand could be linked to the below-normal monsoon.
Rural Demand Remains a Key Concern
ICICI Bank expects exports and investment activity to remain important drivers of manufacturing growth. At the same time, a weaker monsoon could affect rural consumption in the coming months.
The report noted that consumer durables are currently showing stronger momentum than non-durable goods. This suggests that the improvement in consumption is more visible in discretionary spending, while rural demand remains an area to watch.
Disclaimer: This article is based on the information and assessment cited from ICICI Bank Research. Economic conditions and sector performance can change over time. Readers should refer to the latest official data and research reports before making financial or investment-related decisions.