According to the Index of Industrial Production (IIP), India’s factory output growth slowed to an underwhelming 2 per cent in 2019. The factory output growth stood at a much better figure of 7 per cent in 2018.

The Index of Industrial Production refers to growth rates in different industry domains to inspect their economic health. The figure that the industry growth has succumbed to in June, is a four-month low. The growth sump is dominated by a substantial decline in the output of mining and manufacturing.

The sump in individual sectors

The manufacturing sector’s growth slowed down to 1.2% as opposed to 6.9% in 2018, the Mining sector has also witnessed a sharp decline of 75%, growing at a rate of 1.6% as opposed to 6.5 per cent in 2018. 

Power generation was one among the few positives that one could extract from the growth report, as its growth almost sustained itself at a healthy 8.2% from 8.5% in June 2018.

As of the use-based classification, primary goods managed a marginal growth of 0.5% in the past twelve months while the growth of the intermediate good got boosted by 12.4% in 2019 over June 2018.

While the infrastructure and construction goods fell by 1.8% during the period, the capital goods registered a decline of 6.5% during the period.

Consumer related goods also saw a steep decline with durable goods witnessing a fall of 5.5% and non-durable goods falling by 7.8% in the month of June 2019 as compared to June 2018.

IDFC First Bank group economist Indranil Pan spoke on the reason behind the decline in manufacturing groups related to consumer durables and capital goods. Pan said, “It appears that the basic consumption and investment cycles are weak, which is getting reflected in consumer durables and capital goods,” as quoted by Economic Times.

15 Out Of 23 Industries Showed Decline

Industry-wise, only 8 out of a total of 23 industry groups in the manufacturing industry have shown positive growth in June 2019 as compared to June 2018.

The industry group ‘Manufacture of basic metals’ showed the highest positive growth during June 2019, registering a figure of 17.7% followed by 16.5% in ‘Manufacture of food products’ and 10.3% in ‘Manufacture of tobacco products’.

While the industry groups related to ‘Manufacture of paper and paper products’, saw output decline by 19.9% the ‘Manufacture of furniture’ and ‘Manufacture of motor vehicles, trailers and semi-trailers’ saw output decline, 14.3% and 13.9%, respectively, during the month.

First-quarter GDP Data To Be Released On August 30

No immediate respite is expected and the everlasting dip in sales sold automobiles in the past few months justify the same.
“Although the sequential dip in industrial growth is partly on account of the base effect, the anaemic June 2019 IIP print as well as the year-on-year contraction in 15 of the 23 sub-sectors of manufacturing, reinforce the evidence of a slowdown emerging from various sectors,” said Aditi Nayar, principal economist, ICRA.

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