The index of Industrial Production (IIP) is an indicator that measures short term changes in the volume of production of industrial products during the given period. Measured by the index Industrial Production (IIP), industrial output in July’22 grew by 2.4% as against 12.3% in June’22. IIP growth has been slowing ever since it hit one year high of 19.6% in May on the back of favorable base effect.

According to the data released by National Statistical Office (NSO) major chunk of IIP (manufacturing sector) recorded a growth of 3.2% in July as against 12.5% in June. Other sectors such as mining contracted by 3.3% and electricity segment grew by 2.3%.

When compared with pre pandemic period, manufacturing output is growing by mere 1% above the pre pandemic levels. Consumer durables and non-durables also registered a contraction in output from that in July’19. This raises concern over the durable nature of domestic demand. But on other hand output of capital goods, infrastructure, goods and intermediate goods registered a favorable improvement that is above 6%. This is reflective of improvement in investment demand.

Although industrial output could see an improvement in coming months aided by favorable base, output in coming months could be pressured by external demand weakness, tighter financial conditions and elevated price pressure.