Industry’s woes deepen, sees steepest fall in 8 yrs

Manufacturing sector declined by 3.9% compared to 4.8% growth last year

The country’s economic woes are set to deepen as the industrial output shrank 4.3 per cent in September — the steepest fall in activity since 2011.

This is the second straight month of contraction in the industrial activity. In August, factory output or the Index of Industrial Production (IIP) had shrunk by 1.1 per cent.

All three sectors — manufacturing sector, mining and electricity — that made the index witnessed their output shrinking.

The contraction of the overall industrial activity was caused by declining manufacturing sector — which carries over threefourths weight in the industrial index.

In terms of use-based data, lower demand for capital goods and consumer durables have contributed mostly to the negatitive growth of the industrial activity.

Adopting a cautious approach over shrinking consumption, companies have dropped or deferred their expansion plans, which had affected capital goods sector adversely.

The negative growth of bars and rods shows the declined activity in construction.

India’s economic woes are set to deepen as the industrial output shrank 4.3 per cent in September. The performance of all the sectors involved in the index was poor for the second consecutive month and weakest one in seven years. The reason behind the slide is mainly due to weak performance in the manufacturing sector, mining and electricity sectors, according to government data showed on Monday.

Factory output or Index of Industrial Production (IIP) had expanded 4.6 per cent in September last year, while the IIP in August this year witnessed a contraction of 1.1 per cent. The slowdown was mainly witnessed in the manufacturing sector, which declined by 3.9 per cent in September as compared to 4.8 per cent growth a year ago.

“In terms of industries, 17 out of 23 industry groups in the manufacturing sector have shown negative growth during the month of September 2019 as compared to the corresponding month of the previous year,” the data released by ministry of statistics & programme implementation said.

The slowdown of industrial output was followed by India’s gross domestic product (GDP) that only grew by 5 per cent in April-June 2019, while the GDP growth was 8 per cent in the same quarter of 2018-19. On the other hand, the gross value added or GVA, a more realistic proxy to measure economic activity, grew 4.9 per cent in April-June 2019, compared to 7.7 per cent in the same period last year and 5.7 per cent in January-March this year.

Besides, Moody’s Investors Service also changed its outlook on India’s ratings to ‘negative’ from ‘stable’ last week, citing increasing risks that the country’s economic growth will remain lower than in the past. However, experts feel that the present IIP growth may trigger the central bank to go for a further round of policy rate cut in coming months.

“The persistent slowdown in industrial growth may force RBI to go for another round of policy rate cut in months. However a possible rise of headline inflation above the medium term target of RBI of 4 per cent may act as a point of caution before RBI does a rate cut,” said Rahul Gupta, head of currency, Emkay Global Financial Services.

As the factory output is the closest approximation for measuring economic activity in the country’s business landscape, manufacturing sector, which accounts for more than three-fourths of the entire index plays an important role for its growth, contracted 3.9 per cent in September as against 1.2 per cent in August.

“Besides manufacturing segment, mining also fell 8.5 per cent in September as against a growth of 0.1 per cent in August this year. While primary products fell 5.1 per cent in September against a growth of 1.1 per cent in August and capital goods production fell 20.7 per cent in September as well,” the data said, adding that consumer non-durables fell 9.9 per cent in September against a growth of 4.1 per cent in August a month ago.

For the April-June period, the eight infrastructure sectors averaged 3.6 per cent growth and at the same time, exports also contracted 1.7 per cent, citing a slide in economy to some extent for the country.

Factory output or Index of Industrial Production (IIP) had expanded 4.6 per cent in September last year, while the IIP in August this year witnessed a contraction of 1.1 per cent.

The appointed date for implementing the Irdai order is November 15