Higher govt spending, robust investment to boost IIP growth in H2 FY25: Economists
New Delhi, Jan 10 (IANS) Given the expectation of higher government spending followed by improvement in investment in the second half (H2), the Index of Industrial Production (IIP) growth is likely to be higher in H2 FY25, economists said on Friday.
The attention will now shift towards upcoming Budget and the RBI policy which is expected to be growth conducive, said Jahnavi Prabhakar, economist, Bank of Baroda.
IIP growth registered a robust growth of 5.2 per cent in November 2024 against a growth of 3.7 per cent in October.
“This was supported by improvement across all the sectors. Manufacturing sector expanded by 5.8 per cent, with over 15 sub-sectors registering stronger growth than last year. Both mining and electricity sector registered strong growth in November,” said Prabhakar.
Within use-based classification, capital goods, infra good and consumer durable goods registered a healthy increase in November.
“A festival push during this period, supported the production. In the coming months, we expect a steady pick up in production level. This has been reflected by high frequency indicators,” Prabhakar added.
Dharmakirti Joshi, Chief Economist at Crisil, said the festive season led to a sharp rise in production of consumer discretionary products.
“Consumer durables saw the strongest rise in the index (13.1 per cent in November) among major production sectors. The rise was seen across low and high value items, including clothing, electronics, furniture and automobiles,” said Joshi.
The resumption of government capital expenditure (capex) also boosted production of infrastructure and construction goods (10 per cent IIP growth), and capital goods (9 per cent) in November.
IIP growth has been better in the third quarter so far. Further, the first advance estimate for gross domestic product (GDP) pencils in higher overall economic growth in the second half of this fiscal (6.8 per cent) than in the first half (6 per cent).
“The effects of good agricultural output, easing food inflation and improving government capex are expected to support growth in the second half of this fiscal,” according to Joshi.
Arsh Mogre, Economist Institutional Equities, PL Capital-Prabhudas Lilladher, said the manufacturing sector recorded the fastest pace of expansion, driven by infrastructure emphasis and construction demand.
“On net basis, the November IIP data is an encouraging sign, but decisive action will be critical and all eyes will be on Union Budget 2025-26,” Mogre noted.
–IANS
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