Industrial Production Shrinks By 3.8% In October After Poor Performance By Core Sectors

India’s industrial output has contracted to 3.8 per cent in October for time according to the Index of Industrial Production (IIP) data released on December 12.

This is the third consecutive contraction after 4.3 per cent decline in September, and 1.4 per cent in August The fall is attributed to poor performance by power, mining and manufacturing sectors.

During April to October, the IIP growth remained almost flat at 0.5 per cent compared to 5.7 per cent in the same period previous fiscal.

Manufacturing output, which constitutes more than three-fourths of the entire index, contracted by 2.1 per cent in October as compared to 8.2 percent growth a year ago.

“The contraction in industrial output in October 2019 was broad-based, led by all the categories except intermediate goods, which expanded by a sharp 22 per cent in that month,” Aditi Nayar, Principal Economist, Investment Information and Credit Rating Agency of India Limited (ICRA) said.

Sectoral Performance

1. Mining production slumped to 8 per cent in October as against 7.3 per cent in the corresponding period last fiscal.
2. Auto components, commercial vehicles, and two-wheelers were flagged by the government as sectors bringing the overall IIP growth down.
3. Machinery production reduced by 18.1 per cent, the same as last month.
4. Electronic goods experienced the biggest hit, declining by 31 per cent in October, up from a 10.6 per cent fall in September.
5. The growth rates for primary goods in October 2019 fell by 6 per cent as compared to October 2018.
6. Capital goods production fell 21.9 per cent in October compared to 16.9 per cent rise in the year-ago month.

Deepening Slowdown?

India’s GDP grew 4.5 per cent in July-September 2019, the lowest since the fourth quarter of 2012-13, confirming a slowdown in the economy.

“We expect GDP growth in the third quarter of FY20 to broadly print in line with the level recorded in the first quarter of FY20, and mark a moderate sequential improvement from the weak 4.5 per cent displayed in Q2 FY2020. The extent to which revenue considerations necessitate expenditure compression by the central and state governments in Q4 FY2020 would crucially influence the pace of GDP growth in that quarter,” Nayar said.

India’s economy grew 4.5 per cent in the second quarter, its slowest pace since March 2013, due to a sharp contraction in manufacturing output. Seventeen out of 23 industry groups in the manufacturing sector recorded negative growth during September 2019 as compared to the same month last year.

Also Read: Industrial Production Contracts 4.3% In Sept, Steepest Fall In 8 Years