Index of Industrial Production (IIP) and Recent Trends
The Index of Industrial Production (IIP) serves as a critical monthly indicator of the nation's goods output. Notably, June witnessed a 10-month low growth rate of 1.5%, primarily due to significant contractions in specific sectors:
- Mining activity: Experienced a sharp decline of -8.7% compared to 10.3% in June 2024.
- Electricity output: Decreased by -2.6% against 8.6% in June 2024.
Impact of Southwest Monsoon
- The early and erratic onset of the southwest monsoon caused waterlogging in key mining regions, including Odisha, Jharkhand, and West Bengal.
- Damage to power distribution infrastructure and supply chain disruptions were noted.
Industrial Output and Sectoral Growth
Despite challenges, industrial output grew by 3.9% in June, slightly up from 3.5% the previous year. Notable sectoral growth included:
- Capital goods: Increased by 3.5%.
- Intermediate goods: Rose by 5.5%.
- Infrastructure goods: Grew by 7.2%.
This growth underscores the importance of government infrastructure spending in sustaining industrial expansion.
Climate Considerations and Economic Reporting
There is a noted reluctance within India to correlate economic disruptions with climate-related events in official reports like the IIP or GDP. Instead, factors such as:
- 'High base effects'
- Supply chain bottlenecks
- Input cost fluctuations
- Global demand softening
- Domestic consumption contraction
Unlike the European Central Bank or the Bank of England, Indian data agencies have been slow to integrate climate risk frameworks into macroeconomic reporting.
Call for Systemic Change
- There is a growing recognition that India should integrate climate attribution into its economic activity metrics.
- Although the RBI's Financial Stability Reports have acknowledged climate-related risks, these considerations have not yet been included in production-side data like the IIP.
- This systemic shift is crucial given the complexities of climate attribution.
