Festive cheer to power India’s factories in H2
New Delhi: The second half of FY27 is expected to see industrial activity in India buoyed by festive demand and sustained public capital expenditure, according to a report by Union Bank of India. However, unfavorable base effects, weak monsoon conditions, and higher input costs may pose challenges to production growth.
The bank's outlook hinges on whether the improvement in rural demand and continued investment lead to consistent industrial growth, especially as manufacturing and consumer durables face a less favorable comparison with the previous year. Despite a moderate overall trend, a few encouraging signs are expected in H2 FY27, including the approaching festive season and public capital expenditure.
Industrial production growth slowed to 6.7% in September from 7.8% in August, but the first half of FY27 saw a higher growth rate of 6.8%. Both private capital expenditure and infrastructure output grew, with the construction industry expanding 7.2% in September and capital goods production rising 10.4%. Consumer non-durables returned to positive growth at 1.4% after a decline in the previous month, suggesting a potential revival in rural demand.
High-frequency indicators supported the outlook, with two-wheeler sales increasing 33.4% year-on-year and passenger vehicle sales up 23.3% in September. Petroleum consumption also rebounded, growing 3.4% after five consecutive months of decline.
However, the bank warned of downside risks, including weak monsoon conditions and delayed pass-through of higher input costs due to global supply shocks. The report also highlighted adverse base effects in manufacturing, capital goods, and consumer durables, partly due to the impact of GST rate cuts implemented during the same period last year.
Ultimately, the balance between festive-season consumption and public investment, along with the risks from higher input costs and unfavorable base effects, will be crucial in determining the pace of industrial activity in the second half of FY27.
Written by urgent.news from The Economic Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
