India's industrial output rises to 5.2% in Feb on manufacturing growth

India's industrial output grew 5.2% in February, led by manufacturing (6%). However, a Crisil report warns of risks from rising energy prices, input costs, and geopolitical tensions, which could dampen future industrial momentum.

Healthy manufacturing growth pushed up India's industrial output in February, even as rising energy prices and input cost pressures emerged as key concerns for the sector, according to a report by Crisil. The Index of Industrial Production (IIP) grew 5.2 per cent year-on-year in February, slightly higher than 5.1 per cent in January, led by improved manufacturing performance.

"The Index of Industrial Production (IIP) edged up to 5.2% on-year in February from 5.1% in January, driven by stronger growth in manufacturing (6% vs 5.3%)," the report said.

However, this was "partially offset by slowdown in electricity (2.3% vs 5.1%) and mining (3.1% vs 4.3%)."

The report noted that manufacturing has been the key driver of industrial growth, supported by segments such as infrastructure, construction, and capital goods.

Emerging Risks and Headwinds

At the same time, it flagged emerging risks that could weigh on industrial momentum. "A combination of higher prices and tighter supply of critical inputs due to the ongoing conflict in West Asia has imposed downside risks to industrial output," it said.

Rising Energy and Input Costs

Energy costs, in particular, have become a growing concern for manufacturers. "The surge in energy prices is another key challenge faced by manufacturers... Rising input costs are emerging as a key pressure point, and uneven pricing power across firms may limit their ability to fully pass through costs," the report added.

Supply Constraints and Geopolitical Uncertainty

The report also highlighted that gas availability constraints could disrupt output in sectors dependent on such inputs, with supplies being rationed.

Despite these headwinds, domestic demand continues to provide some cushion. "Healthy domestic demand scenario, though, provides a crucial buffer currently," it noted.

Crisil further cautioned that prolonged geopolitical uncertainties, particularly in West Asia, could impact investment decisions and delay recovery in private sector spending.

Overall, while manufacturing-led growth has kept industrial output resilient, rising energy prices and supply-side constraints remain key risks going forward. (ANI)

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