India: Manufacturing Growth Falls Short of GDP Projections

The manufacturing slowdown in India is a cause for concern. It is a sign that the economy is losing momentum. The government needs to take steps to revive domestic consumption and boost investment. Otherwise, the economy could be in for a slowdown in the coming quarters.

Manufacturing Slowdown in India

Manufacturing growth in India fell short of GDP projections in 2022-23, clocking 4.5%. This was due to weak consumer demand, which pulled down industrial output. Capital goods led the charge, growing 12.9% in 2022-23. The government needs to take steps to revive domestic consumption and boost investment in order to sustain economic growth.

Manufacturing Growth Slows in 2022-23

Manufacturing growth in India slowed in 2022-23, clocking 4.5%. This trails the 7% GDP growth rate projected for 2022-23 in the second advance estimate by the National Statistical Office (NSO) by 2.5 percentage points.

Consumption Demand Pulls Down Industrial Output

Consumption demand pulled down industrial output through the year with both the consumer durables and non-durables segments posting meagre 0.5% growth apiece. The slowdown in consumer durables over the year was more pronounced than that for non-durables, which had bottomed out during the pandemic.

Capital Goods Lead the Charge

Capital goods understandably led the charge, growing 12.9% in 2022-23 after clocking 16.9% in the prior year. This also propped up the output of goods used in construction and infrastructure.

Average Growth in Manufacturing in Step with Overall Economic Performance

The average growth in manufacturing since Covid lockdown restrictions were lifted is in step with overall economic performance. There are two caveats here. One, manufacturing recovered sooner than services, and growth was bound to taper off as contact-intensive services came on stream. And two, the industry is the recipient of a big push from the government’s capital expenditure programme.

Consumer Demand Remains a Drag

Consumer demand remains a drag, which could delay a private investment resurgence. The benefits of India’s quick recovery in manufacturing exports are also dissipating as the Chinese economy emerges from lockdowns and global trade slows. India’s industrial slowdown is a precursor to its economy losing momentum, unless it can revive domestic consumption.