Industrial production loses steam, growth at 3-month low of 4.3 % in Aug

Industrious days ahead: IIP data to come todayIndustrial output growth faltered in August with growth dipping to a three-month low of 4.3 per cent as manufacturing growth slowed down and mining activities contracted.In the previous month of July, the Index of Industrial Production (IIP) had moderated slightly to 6.6 per cent, down from 6.8 per cent in June. The cooling down of growth can be attributed mainly to the manufacturing segment, constituting the bulk of the index at 77.6 per cent, growing by only 4.6 per cent, significantly lower than the 6.9 per cent rise in July.“While growth rate has slowed down over the last two months due to the waning of the base effect, which was higher last year due to restocking post GST, on a cumulative basis, it was on target at 5.2 per cent,” Madan Sabnavis, chief economist at CARE Ratings, said. Other economists were disappointed with the latest figures that should have been boosted by pre-festival manufacturing. “Clearly, the IIP growth is not showing the buoyancy that the onset of the festival season should show,” Devendra Kumar Pant, chief economist at India Ratings & Research, said.Among the 23 sub-sectors within manufacturing, seven recorded a year-on-year contraction, up from six in July. Industries such as auto, pharma, food, metals and non-metallic products, among others, continued to do well. Apart from this, furniture and apparels remained the largest growth pullers. On the other hand, electronics did worse despite the government pushing for growth in the sector through a series of benefits and the phased manufacturing programme aimed at reducing imports of electronics goods.ALSO READ: India set to become engine of world’s growth, says PM Narendra ModiEconomists said that higher growth rates within manufacturing resulted due to the favourable base effect of negative growth in 2017 for manufacturing and the overall industry.On the other hand, mining output contracted by 0.4 per cent in August, down from 3.5 per cent in July, in line with expectations. Despite this, electricity generation remained high, growing by 7.6 per cent in the latest month, up from the 6.6 per cent rise in July.Economists had pointed out earlier that above 6.5 per cent growth rates sustaining over the next 2-3 quarters will be crucial for hitting the 5-6 per cent mark for the year. If this is achieved, it will be a significant recovery from the double whammy of GST and demonetisation.The sensitive capital goods segment, which connotes investments, saw output rise by 5 per cent, slightly recovering from the low 2.79 per cent rise in the previous month. The latest figures still remained paltry compared to the 9.8 per cent rise back in June.

ALSO READ: India’s manufacturing sector likely to witness robust growth in Q2: Survey“Elsewhere, at the use based level, infrastructure goods and consumer non-durables grew in high single digit in August. However, cumulatively, in the April–August period of the current financial year, the sectors that stand out — recording high single-digit growth — are electricity at broad based level and consumer durables, capital, infrastructure and primary goods,” Pant added.In August, consumer durables grew by 5.2 per cent. In July, the segment had shown signs of firmly escaping the spell of low growth and contraction seen over the past few months, with growth jumping more than 14.4 per cent.ALSO READ: Manufacturing in India to be a $1 trillion contributor: Suresh PrabhuGrowth in the infrastructure/construction goods segment also picked up in August at 7.8 per cent, slightly lower than the 8.5 per cent.
Source: Business Standard