India's growth story may face stagnant risks: Economists

Hyderabad India has witnessed a moderate industrial growth at 3.2 per cent during the festive month of October, against 4.5 per cent in the same month previous year. As the industrial production was much below the expectations, economists are worried that the country's growth story may remain stagnant in the coming months. They call for necessary measures from the Central and State governments for the economic revival.

However, the index of industrial production (IIP) was 7.8 per cent higher than the pre-pandemic level of October 2019. Only infrastructure sector offered the silver lining with 5.3 per cent growth on a high base of 10.9 per cent rise in output. "The IIP growth has been very fragile and even festive demand was not able to uplift IIP growth in October 2021," said India Ratings Chief Economist DK Pant.

CARE Ratings Chief Economist Madan Sabnavis said, "Our expectation was 5.1 per cent, based on the expectation of pent-up demand pushing up growth. The contraction in the first five months of last year had boosted growth in the early months of the current fiscal. Moderation in this base effect has dampened growth in recent months. The chip shortages that impacted many sectors, including automobiles and some consumer goods, contributed to this slowing."

Among 23 manufacturing sub-sectors, 10 have seen negative growth in October. Motor vehicles recorded a 12.6 per cent dip in production in October. Industrial output surged up 20 per cent in the April-October period, while there was a 17.3 per cent reduction in the corresponding period last year. The Indian economy had grown 8.4 per cent in the Q2 of FY 2022. Recently, the Reserve Bank of India (RBI) had retained its growth target at 9.5 per cent in FY 2022.

Aditi Nayar, Chief Economist of ICRA, said: "Even as the ongoing supply challenges in the auto sector persisted, the year-on-year performance of several other high-frequency indicators deteriorated in November 2021, including electricity demand, GST e-way bills, port cargo traffic, suggesting that economic activity lost steam after the festive season ended, with a satiation of pent-up demand."

This month is likely to witness a base-effect bounce because of 1.6 per cent slimming down in the previous year. Expressing optimism over the economy, Barclays Chief India Economist Rahul Bajoria said: "Higher government spending, especially capital expenditure, could spur further industrial demand, keeping the recovery intact through H2 fiscal year (September 2021-March 2022)."