India’s industrial growth contracts by 1.1% in August

14 Oct 2019 Evaluate

Reinforcing fears of a slowing economy, India's factory output growth, measured by the Index of Industrial Production (IIP), contracted by 1.1% in August, recording the poorest performance in seven years due to a sharp decline in production of capital goods and consumer durable. The IIP had shown a growth of 4.8% in August 2018. The previous low in IIP was (-) 1.7% in November 2012. As per the data released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation, IIP with base 2011-12 for the month of August stood at 126.6, which was 1.1% lower as compared to the level in the month of August 2018. The cumulative growth for the period April-August 2019 stood at 2.4% over 5.3% in the corresponding period of the previous year.

On the sectroal front, the manufacturing sector, which contributes over 77% to the IIP, showed a decline of 1.2% in output during August 2019 as against a growth of 5.2% in the same month of last year. The previous low in the manufacturing segment was recorded at (-) 1.8% in October 2014. The data also revealed that electricity generation growth too was in negative at (-) 0.9% as against an expansion of 7.6% in the year-ago month, while the mining sector growth was flat at 0.1%. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of August 2019 stand at 92.1, 129.0 and 165.7 respectively. The cumulative growth in these three sectors during April-August 2019 over the corresponding period of 2018 has been 2.8%, 2.1% and 5.0%, respectively.

The capital goods segment, a crucial sector that signifies investment, contracted 21%. Contraction was 7% in the previous month. Production in the category remained in the red for the seventh straight month. As per Use-based classification, the growth rates in August 2019 over August 2018 are 1.1% in Primary goods, 7.0% in Intermediate goods and (-) 4.5% in Infrastructure/ Construction Goods. The Consumer durables and Consumer non-durables have recorded growth of (-) 9.1% and 4.1%, respectively.

In terms of industries, 15 out of the 23 industry groups in the manufacturing sector have shown negative growth during the month of August 2019 as compared to the corresponding month of the previous year. The industry group ‘Manufacture of motor vehicles, trailers and semi-trailers’ has shown the highest negative growth of (-) 23.1% followed by (-) 21.7% in ‘Manufacture of machinery and equipment n.e.c.’ and (-) 18.0% in ‘Other manufacturing’. On the other hand, the industry group ‘Manufacture of basic metals’ has shown the highest positive growth of 11.8% followed by 11.3% in ‘Manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials’ and 10.3% in ‘Manufacture of wearing apparel’.

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