India’s industrial production likely improved in October 2024, driven by festival demand, according to a report by Union Bank of India.

The report highlighted that the Index of Industrial Production (IIP) surged by 3.7 per cent year-on-year, up from 3.1 per cent in September. However, this is significantly lower than the 11.9 per cent growth recorded in October 2023, which was driven by a low base effect.

It said, “Industrial production growth, as indicated by IIP, may have improved to 3.7 per cent YoY, from 3.1 per cent in previous month and vs 11.9 per cent in Oct’23.”

The report also added that high-frequency indicators suggest aggregate demand regained strength during the festival season. The uptick in demand was supported by robust rural and urban consumption, fuelled by improved production and spending patterns.

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The core sector, which accounts for 40 per cent of the IIP, played a key role in this recovery as per the report, growing by 3.1 per cent in October–a three-month high–compared to 2.4 per cent in September. This improvement was attributed to higher output in coal, steel, and electricity.

However, the production of fertilizers, refinery products, and cement showed a decline, while crude oil and natural gas output contracted during the same period.

The report also pointed out that manufacturing activity showed signs of revival. Increased auto production, driven by festival demand, reflected the recovery in this sector. Consumer non-durables likely saw a positive shift, signalling a pickup in rural demand.

According to the Reserve Bank of India’s (RBI) November bulletin, rural India emerged as a significant contributor to the demand recovery during the festival season. This was bolstered by a sharp increase in kharif crop output and optimism around the upcoming rabi harvest. E-commerce companies particularly benefited from this trend, reporting robust sales in rural markets.

Urban demand, represented by consumer durable goods, also picked up during the festival period, though the momentum remained weaker compared to rural demand.

The report outlined, “We estimate that manufacturing IIP growth improved on the back of festival season demand as reflected by auto production growth figures.”

The findings highlight the critical role of seasonal factors and rural consumption in shaping India’s economic recovery, with festival demand providing a much-needed boost to industrial activity in October.

The official figures of October IIP will be released by the Ministry of Statistics & Programme Implementation on 12th December.