Manufacturing push lifts IIP in Feb, but energy price surge raises concern going forward: 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.

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.

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.

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)