India's industrial output records 5.1% growth in May, driven by manufacturing expansion

India’s industrial output rose to 5.1 per cent in May, up from 4.9 per cent in April, driven by higher electricity generation and widespread manufacturing expansion.

The rise indicates that factory activity has improved, suggesting that domestic demand has persevered in the face of global uncertainties.

Manufacturing, which has the largest weight in the Index of Industrial Production (IIP) basket (76 per cent), rose 5.5 percent in May, which was slightly less than the growth in April. This suggests that industrial activity is continuing to gain momentum. Automobiles, electronics, manufactured metals, and electrical equipment drove growth.

Among the main manufacturing categories, electrical equipment saw the most growth, increasing 20.8 percent year-on-year (YoY) in May.

Motor vehicles increased by 14.5 per cent, other transportation equipment by 14.3 per cent, and manufactured metal products by 15.5 per cent. Products related to computers and electronics also saw a strong increase of 11.4 per cent.

Furthermore, capital-intensive industries continued to perform well, which is indicative of ongoing investment demand and infrastructure-driven spending.

The largest contributor to headline growth was the supply of gas and electricity, which increased by 9.9 per cent in May. The 11.1 per cent increase in electricity output alone is likely due to the increased demand for power throughout the summer.

However, mining and quarrying continued to be a hindrance to total production. Weaker output of crude oil, gas, and non-metallic minerals caused the industry to fall 1.6 percent in May after contracting 3.7 percent in April.

A number of industries that deal with consumers were weak. Production of refined petroleum products decreased by 4.7 per cent, printing fell by 10.3 per cent, and wearing apparel dropped by 8.8 per cent. Chemicals saw a 1.3 percent decline and continued to be under pressure.

Investment-linked output continued to be the most robust growth pillar, according to use-based data. The demand for machinery and equipment is still strong, as seen by the 12.9 per cent increase in capital goods output in May compared to 12 per cent in April and a 9.5 per cent rise in the previous year.

Consumer durables increased by 7.2 per cent, while infrastructure and building items climbed by 5.8 per cent, indicating that urban discretionary demand remained strong.