India’s factory output growth slowed to 4.9% in March from a downgraded 5.6% uptick in February, despite benevolent base effects from the previous year when the Index of Industrial Production (IIP) had shrunk 1.9%. Output from mines slid to a 19-month low growth of 1.2%, while manufacturing growth picked up from 4.9% in February to 5.2%, still marking a five month-high. Electricity generation rose 8.6% but over a contraction in March 2023. The National Statistical Office, which will release fresh GDP growth estimates for 2023-24 this month end, will thus factor in a 5.8% uptick in industrial output through FY2023-24, moderately higher than the 5.2% rise recorded in the previous year. Most of this annual increase came from mining, up 7.5%, while manufacturing saw a milder pick up to 5.5% from 4.7% in 2022-23 and electricity generation growth eased to 7.1%. Production growth was strongest for capital goods as well as infrastructure and construction goods for the second straight year — not surprising given the ramp up in government infrastructure spends to pump prime the economy till private capex recovers.

However, for private investments to take over the economy’s growth engine, household consumption signals are critical and there is little comfort here for the second year in a row. Production of consumer durables and non-durables rose just 3.6% and 4%, respectively, on top of a meagre 0.6% and 0.7% uptick in 2022-23. This matches with the 3% growth estimated in private consumption spends over last year, and their production this March was still below pre-COVID levels. Hopes of an above-normal monsoon may prop up rural demand dented by last year’s erratic rainfall, although tight credit conditions could impair urban consumption. As some economists have stressed, consumption recovery since the pandemic has been uneven, driven by demand for higher-end goods and services from upper-income households, while lower-income homes have turned reluctant spenders even for fast-moving consumer goods. Job creation and real wage growth for those already employed are imperative for a broad-based demand recovery that triggers private capex. The concern here is that employment-intensive manufacturing segments such as apparel, computers and electronics, furniture and leather products, have contracted in 2023-24, with weaker exports only explaining part of this downturn. The latest IIP data also reflect flagging momentum — growth slid to a three-quarter low of 4.9% between January and March. The next government must prioritise addressing the broader challenges haunting hesitant consumers and reviving platforms for reticent investors to voice their concerns freely.