Industrial production contracts 4.3% in September, lowest in 8 years

Representational image. File

Representational image. File   | Photo Credit: V.V. Krishnan/ M. Periasamy

Factory output, as measured in terms of Index of Industrial Production (IIP), had expanded 4.6% in September 2018

Industrial activity in September contracted sharply by 4.3%, a historical low, driven by major slowdowns in the capital goods, mining, and manufacturing sectors, according to official data released on Monday.

The contraction in the Index of Industrial Production (IIP) in September is compared with the contraction of 1.1% in August. The Index had grown 4.3% in September of the previous year.

“This is the first time after November 2012 that all three broad-based sectors have contracted and the lowest monthly growth in the 2011-12 base year series,” Devendra Kumar Pant, Chief Economist and Senior Director, Public Finance, India Ratings & Research, said. “In the old (2004-05) base, IIP in October 2011 contracted by 5%.”

Within the Index, the capital goods sector saw a contraction of 20.7%, compared with shrinkage of 21% in August. The mining sector contracted by 8.5%, compared with an anaemic growth of 0.1% in August. The manufacturing sector contracted 3.9% in September, compared with a contraction of 1.2% in the previous month. The electricity sector, too, saw a continued contraction in September, shrinking 2.6%, compared with a contraction of 0.9% in August.

The consumer durables sector continued to shrink in September, by 9.9%, compared with a contraction of 9.1% in August. The consumer non-durables sector contracted by 0.4% compared with a growth of 4.1% over the same period.

“The Indian economy is presently facing a structural growth slowdown originating from declining household savings rate, and low agricultural growth,” Mr. Pant said. “Low agricultural growth is feeding into low agricultural and non-agricultural wage growth in rural areas, which is impacting rural demand adversely.”

India Ratings said it believes monetary authorities will continue to follow an accommodative monetary policy, and expects further rate cuts in the December 2019 monetary policy decision.

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Printable version | May 27, 2020 8:44:04 PM |

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