Industrial production came in below expectations, easing to 3.2% in Dec-24 from a downwardly revised 5.0% in Nov-24.
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Annualized performance of high frequency indicators had indicated a mixed trend for Dec-24, especially on the consumption side. However, a pick-up in Government capex spending in Dec-24, is likely to have offered support to investment-oriented sub-sectors that did see an improved performance. With Central government slated to spend 33% of revised budgeted target in Q4 FY25, this momentum could continue well into Q4 FY25.
Industry growth in FY26 will be premised on the pick-up in domestic consumption, as well as the global outlook. The reduction in personal income taxes, announced in the Budget will serve as a consumption stimulus of nearly Rs 1 tn. This could translate into improved urban consumption across staples, big/small discretionary goods as well as discretionary services. In addition, we remain constructive on progressive recovery in rural demand. A positive outlook on consumption should reinforce demand visibility and support domestic production.
Global outlook remains highly uncertain with the onset of Tariff wars. We believe that FY26 GDP growth could possibly be closer to 6.7%, the higher end of our forecast range i.e., 6.3-6.7%