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Last Updated : Sep 12, 2019 06:50 PM IST | Source: Moneycontrol.com

IIP on the mend, grows 4.3% in July

The manufacturing sector grew 0.6 percent in April-June 2019 from 12.1 percent in the same quarter last year, and 3.1 percent in January-March, reflecting decelerating production activity in India's factory floors

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India's industrial output grew 4.3 percent month-on-month (MoM) in July, according to the Index of Industrial Production (IIP) data released by the government on September 12.


Industrial output, or factory output, is the closest approximation for measuring economic activity in the country's business landscape.


Manufacturing output, which accounts for more than three-fourths of the entire index, grew 4.2 percent in July, a sharp fall from the 7 percent growth a year ago.


The manufacturing sector grew 0.6 percent in April-June 2019 as against 12.1 percent in the same quarter last year and 3.1 percent in January-March, reflecting decelerating production activity in India's factory floors.


Mining grew 4.9 percent in July against a 3.4 percent growth in the year-ago period. Electricity grew 4.8 percent, falling from a 6.6 percent growth a year ago.


Primary goods recorded a growth of 3.5 percent in July, a sharp fall from a growth of 6.8 percent a year ago. Capital goods production recorded a contraction of 7.1 percent in July, against a growth of 2.3 percent in the same period a year ago. Infrastructure construction recorded a growth of 2.1 percent in July against a growth of 9.2 percent a year ago.


Consumer durables contracted 2.7 percent in July, a huge fall from a 14 percent growth in the same period a year ago. Consumer non-durables grew 8.3 percent in July from 5.3 percent a year ago.


"July 2019 IIP growth increased to two month high of 4.3 percent. Unlike June 2019, all three sectors -mining (4.9 precent), manufacturing (4.2 percent) and electricity (4.8 percent) – contributed to IIP growth. However, use-based group growth performance was volatile and capital goods contracted seventh consecutive months and consumer durables second consecutive month," said Devendra Kumar Pant, Chief Economist and Senior Director, public finance, India Ratings & Research (Fitch Group).


The continued double digit growth of intermediate goods growth in last three months and 3.5 percent growth in primary goods in July 2019, seems to give hope of minor industrial recovery in the coming months.


Pant, however, said, "It will be too early to term this as recovery and one has to wait for some more time and completion of forthcoming festive season to judge whether the industrial recovery is there for real. In the past we had seen the pattern of some industrial revival and then collapse in industrial recovery."


India's gross domestic product (GDP) grew 5 percent in April-June 2019, official data released on August 30 showed, buffeted by weak household spending and muted corporate investment. GDP growth was 8 percent in the same quarter of 2018-19.


Factory output measured by the index of industrial production (IIP) contracted in March 2019, the first time in 21 months. This shows declining momentum of both investment and consumption. Even core industries productions of steel, electricity, coal and cement are falling or have been stagnant in recent quarters.


All sectors seem to have been hit hard by subdued demand. The auto sector is in the midst of one of its worst crisis. Passenger vehicle sales in the country declined by 17.07 percent, 20.55 percent, 17.54 percent and 31 per cent respectively in the months of April, May, June and July.


The national income data have reinforced deceleration signs that were emanating from a slew of shop-end data, such as car and consumer goods sales, often seen as proxy indicators to gauge trends in household spending.

Earlier this year, the International Monetary Fund cut India's gross domestic product growth forecast for 2019-20 by 20 basis points to 7.3 percent, following similar action by the Asian Development Bank and the Reserve Bank of India (RBI).



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First Published on Sep 12, 2019 05:51 pm
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