Increased Government Expenditure and Strong Investments to Propel IIP Growth in H2 FY25: Analysts
Click to start listening
New Delhi, Jan 10 (NationPress) Analysts have indicated that due to the expected rise in government spending and subsequent improvements in investments during the second half (H2), the Index of Industrial Production (IIP) growth is projected to increase in H2 FY25.
The focus is now directed towards the upcoming Budget and the RBI policy, which are anticipated to be conducive to growth, remarked Jahnavi Prabhakar, an economist at Bank of Baroda.
The IIP growth showcased a solid increase of 5.2 percent in November 2024, compared to a 3.7 percent growth in October.
“This growth was backed by improvements across all sectors. The manufacturing sector grew by 5.8 percent, with more than 15 sub-sectors demonstrating stronger growth compared to last year. Both the mining and electricity sectors also reported significant growth in November,” Prabhakar stated.
Within the use-based classification, capital goods, infrastructure goods, and consumer durables experienced a healthy rise in November.
“The festive season contributed positively to production levels. In the upcoming months, we anticipate a consistent increase in production, as indicated by high-frequency data,” added Prabhakar.
Dharmakirti Joshi, Chief Economist at Crisil, noted that the festive season resulted in a notable surge in the production of consumer discretionary items.
“Consumer durables achieved the highest growth in the index (13.1 percent in November) among major production sectors, with increases across both low and high-value items such as clothing, electronics, furniture, and automobiles,” Joshi elaborated.
The revival of government capital expenditure (capex) also fueled the production of infrastructure and construction goods (10 percent IIP growth) and capital goods (9 percent) in November.
The IIP growth has shown improvement in the third quarter thus far. Moreover, the first advance estimate for gross domestic product (GDP) projects stronger overall economic growth in the second half of this fiscal year (6.8 percent) compared to the first half (6 percent).
“The positive effects of good agricultural output, declining food inflation, and enhanced government capex are expected to bolster growth in the second half of this fiscal year,” Joshi noted.
Arsh Mogre, Economist at Institutional Equities, PL Capital-Prabhudas Lilladher, mentioned that the manufacturing sector experienced the quickest pace of expansion, driven by a focus on infrastructure and construction demand.
“Overall, the November IIP data is a positive indication, but decisive measures will be crucial, and all attention will be on the Union Budget 2025-26,” Mogre emphasized.
