Growth in industrial production slowed to a four-month low of 1.96% in June 2019, due in large part to a slowdown in the manufacturing sector and a dramatic contraction in the capital goods and consumer durables sectors.
Growth in the Index of Industrial Production (IIP) stood at 4.55% in May 2019, and at 6.53% in July of last year. Within the index, growth in the manufacturing sector slowed to 1.17% in June 2019 from 4.46% in the previous month. Growth in the mining sector also slowed to 1.62% from 2.42% over the same period.
“This confirms ongoing slowdown focussed in the industrial sector and also in the capital goods sector,” said D.K. Srivastava, chief policy adviser, EY India.
‘Unutilised capacity’
“Capital goods contraction shows the existence of unutilised capacity. New investments are not happening. The relatively serious news is the fall in consumer durables which reflects a broad-based consumption slowdown.” The capital goods sector contracted by 6.48% in June, compared with a contraction of 1.41% in the previous month. The consumer durables sector also contracted in June by 5.5%, compared with a growth of 0.3% in May 2019.
Construction also slipped in June, contracting 1.83% compared with a growth of 1.78% in May. Electricity was the only one out of the major IIP groups that saw an acceleration in growth, at 8.19% in June compared with 7.41% in May. “This looks like a trend that will continue until the end of the monsoon because the government’s capital expenditure was stalled first because of elections and then the rains,” he added.“Only when it starts again can one expect any sort of recovery.”
