India's Industrial Growth At 3.5 Pc In July Signals Healthy Recovery: Economists

(MENAFN- IANS) New Delhi, Aug 28 (IANS) India's industrial output saw a strong rebound in July, with the Index of Industrial Production (IIP) rising to 3.5 per cent from 1.5 per cent in June, driven by robust growth in manufacturing and infrastructure-related sectors, economists said on Thursday.

They believe the recovery signals healthy momentum despite global uncertainties.

According to Aditi Nayar, Chief Economist at ICRA Limited, the July numbers reflect a broad-based improvement across all sectors.

Manufacturing output, in particular, grew at a six-month high of 5.4 per cent, supported by strong demand for construction inputs and consumer durables.

Infrastructure and construction goods saw a sharp rise, recording their best performance in nearly two years with growth of 11.9 per cent, led by cement and steel.

“Consumer durables output also grew by 7.7 per cent, aided by pre-festive stocking and stronger GST e-way bill activity,” she noted.

Nayar noted that capital goods output posted healthy growth of 8.6 per cent in the April-July period, supported by machinery exports and government capital expenditure.

However, she cautioned that private investments may remain subdued due to global uncertainty and tariff-related concerns.

Looking ahead, she said monetary easing and GST rationalisation could lift urban consumption, though heavy monsoon rainfall may keep growth under 3 per cent in August.

Dipti Deshpande, Principal Economist at Crisil Limited, described July's IIP rise as an“anticipatory surge,” supported by both government-led infrastructure spending and strong export activity ahead of US tariff hikes.

She highlighted that major export sectors such as metals, machinery, pharmaceuticals, auto components, and electronics contributed to the rise in manufacturing output.

Deshpande pointed out that while consumer durables grew sharply in July, non-durables saw only a modest rise due to weak performance in food products.

She warned that the recent US tariff hikes, the steepest faced by India among its peers, could weigh on exports in the coming months, particularly in sectors like textiles, gems and jewellery, and chemicals.

MSMEs, which account for nearly 45 per cent of India's exports, are seen as most vulnerable to the tariff shock.

Despite these risks, Deshpande added that rising domestic demand, especially from rural areas, could help offset some of the export slowdown.

“Consumer demand is expected to pick up in the coming quarters and support growth,” she said.

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