Amid the ongoing tension in West Asia and the crude oil crisis, the good news for the Indian economy is that IIP growth has jumped by 8% in August on the strength of the manufacturing and power sectors.

Industrial Output Growth jumps 8% in August

Amid ongoing tensions in West Asia and the crude oil crisis, some good news has emerged for the Indian economy. According to data released on Monday by the National Statistics Office (NSO), India's industrial output grew by 8% in August. This means that factory production has increased rapidly.

This impressive increase in manufacturing output has pushed India's industrial production growth rate (IIP) to 8% in August. This is the second time in 29 months that the IIP growth rate has seen such a rapid increase. The previous increase was 8.8% in June.

The manufacturing sector accounts for the largest share of the Index of Industrial Production (IIP), accounting for approximately 77.6%. Companies had ramped up production since August in anticipation of the upcoming festive season. This sector received a significant boost due to increased production in automobile, electronics, textile, and consumer durables factories (TVs, refrigerators, etc.).

Of the four major sectors, two—manufacturing and electricity and gas supply—showed improved performance in August compared to the previous month. Water supply, sewerage, and waste management remained slow, while mining and quarrying experienced a more significant decline.

FMCG sector hit a brake

Despite the growth in the manufacturing and power sectors, the FMCG sector suffered a setback in August. According to a NielsenIQ report, the Indian FMCG (fast-moving consumer goods) sector is currently experiencing a slowdown. Sales in this category have declined by 68%.

The overall sales of FMCG goods across the country declined by 2% during the June quarter, which was not limited to a select few items, but 68% of the categories like soap, washing powder, refined oil, biscuits and namkeen saw a sharp decline in sales.

Meanwhile, FMCG sales in rural India declined by 5%. A weak start to the monsoon and rising agricultural costs have impacted rural incomes, which is affecting sales of FMCG goods.

To address rising costs in the FMCG sector, companies have increased prices by up to 2.8%. Consequently, sales value growth has been limited to just 0.8%. Due to the price increases, consumers have reduced their purchases, leading to a decline in overall sales.