India May Need Industrial Policy Support Amid Supply Chain Risks: CareEdge
India’s export-oriented industrial sectors may require policy support to weather a volatile global environment marked by supply chain disruptions and geopolitical uncertainty, even as industrial output growth improved in April, according to a report by CareEdge Ratings.India’s industrial output rose 4.9 per cent year-on-year in April under the revised index of industrial production (IIP) series, accelerating from 3.2 per cent in March, helped by stronger manufacturing activity, the ratings and analytics firm said in a report released on 01 June.
However, the company warned that industrial units, particularly export-focused businesses, would need to navigate an increasingly uncertain external environment shaped by the unresolved West Asia crisis and persistent supply chain disruptions.
“The global economy continues to present a turbulent scenario with lingering uncertainty over the resolution of the West Asia crisis,” CareEdge said in the report, adding that this “could warrant policy support for industrial units in these volatile times”.
Manufacturing, which accounts for more than three-quarters of the industrial index, expanded 6.2 per cent in April compared with 3.9 per cent in March, supported by output growth across 17 of 23 manufacturing sub-sectors.
Among the strongest performers were textiles, electrical equipment, machinery and equipment, motor vehicles and other transport equipment, signalling broad-based industrial resilience despite external pressures, according to the report.
Capital goods production, often seen as an indicator of investment activity, rose 16 per cent in April, extending double-digit growth for a sixth straight month. Infrastructure and construction goods output increased 7.1 per cent, while consumer-oriented sectors also improved, with consumer durables growing 4.3 per cent and consumer non-durables returning to expansion at 2.8 per cent after contracting in March.
Still, CareEdge said the durability of consumption-led recovery remained uncertain due to volatile performance in consumer-facing sectors and risks from rising inflation and fuel prices.
On the supply side, mining and quarrying remained a weak spot, with output contracting for a fourth consecutive month. The sector shrank 5.1 per cent in April, compared with a 2.5 per cent contraction in March.
The report also flagged domestic risks that could complicate the industrial outlook, particularly weather-related concerns tied to developing El Niño conditions and forecasts of a below-normal monsoon.
A weaker monsoon could weigh on consumption and inflation trends, adding another layer of uncertainty to industrial growth, the company said.
India recently revised the base year for the IIP to 2022-23 from 2011-12 to align it with other macroeconomic indicators, including gross domestic product and the wholesale price index. The revised series also expands industrial coverage, adds greater data granularity and replaces inactive factories in the sample with operational units of similar production scale.
While April’s stronger output suggests momentum in parts of manufacturing and investment-linked sectors, CareEdge cautioned that India’s industrial activity faces mounting external and domestic headwinds, making policy support for vulnerable export-oriented industries increasingly relevant.
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