Industrial output contracted 1.1% in August, shows government data

Andrew Cummings
October 12, 2019

"Fifteen out of 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", Ministry of Statistics & Programme Implementation said in a press release.

The cumulative growth in April-August over the corresponding period of the previous year was 2.4 per cent.

Consumer durables output too declined by 9.1% in August 2019 as against 5.5% growth in the same month of 2018.

India's industrial output contracted 1.1% in August compared to the same month a year ago, government data showed on Friday. Mining sector did not show any changes with a growth rate of 0.1 per cent in August.

Signs of slowdown became more pronounced as the government data on Friday revealed factory output shrank 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.

As per use-based classification, primary goods grew at 1.1 per cent in August 2019, whereas Capital goods reported a de-growth of 21 per cent. Exports contracted 1.7 percent during the same period.

Index of Industrial Production (IIP) had expanded by 4.8 per cent in August 2018.

India's gross domestic product (GDP) growth in the March quarter slowed to a five-year low of 5.8 percent, down from 6.6 percent in the December quarter. This is the first contraction after June 2017. The policy measures announced by the government after the first quarter GDP growth of 5 per cent are more supply side interventions and are unlikely to boost demand. "With no fiscal space available to the government, it is unlikely that the demand in going to return back soon", Devendra Kumar Pant, Chief Economist and Senior Director, Public Finance India Ratings & Research (Fitch Group), said.

"The Indian economy is presently facing a structural growth slowdown originating from declining household savings rate, and low food inflation and agricultural growth". So far this year, it has lowered the policy rate (or the repo rate, at which the RBI lends to commercial banks) by 135 basis points.

The negative growth number may prompt yet another policy rate cut in December, when the Monetary Policy Committee meets next.

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