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Factory output contracts 0.3% in December 2019

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

February 13, 2020 / 03:23 PM IST

India's industrial output contracted 0.3 percent in December against a growth of 1.8 percent in November, according to the Index of Industrial Production (IIP) data released by the government on February 12.

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

Manufacturing output, which accounts for more than three-fourths of the entire index, fell 1.2 percent against a growth of 2.7 percent in November.

Mining production grew 5.4 percent against a growth of 1.7 percent a month ago.

The growth of primary products was 2.2 percent against a fall of 0.3 percent last month. Production of capital goods in December saw a contraction of 18.2 in December against a contraction of 8.6 percent a month ago.

Consumer durables fell 6.7 percent in December against a fall of 1.5 percent in November. Electricity production fell 0.1 percent against a fall of 5 percent a month ago.

“India Ratings and Research (Ind-Ra) believes turnaround in factory output growth is still not visible and the wait for green shoots on the industrial front is getting longer,” said Sunil Kumar Sinha, Principal Economist, India Ratings.

The Budget, presented by Finance Minister Nirmala Sitharaman, projected a nominal GDP growth of 10 percent in the next fiscal, followed by 12.6 percent and 12.8 percent in FY22 and FY23, respectively.

However, Moody's Investors Service, on February 4, said economic growth projections made by the minister in her Budget for 2020-21 appear ambitious given the structural and cyclical challenges facing the Indian economy.

According to the advanced estimate released by the Central Statistics Office (CSO), economic growth rate for 2019-20 has been pegged at 5 percent, slower than the 2018-19 expansion rate of 6.8 percent.

India's GDP — the total value of goods and services produced in the country — slumped to over 6-year low of 5 percent in the April -June quarter and 4.5 percent in the July - September quarter of 2019.

The government estimated that gross value added (GVA), which is the GDP minus net taxes, will grow at 4.9 percent in 2019-20.

The GDP numbers have confirmed fears of a deepening slowdown in the economy as households aren't spending enough to buoy demand and companies aren't adding capacities or hiring more.

GVA grew 4.3 percent in July-September 2019, compared to 4.9 percent in the previous quarter and 6.9 percent in the second quarter of the previous year.

The slowdown comes on the back of the 5 percent GDP growth recorded in April-June and 7.1 percent in July-September last year.

The CSO projected that the manufacturing sector will grow at 2 percent in 2019-20 against 6.9 percent in 2018-19, while mining and quarrying will grow at 1.5 percent against 1.3 percent last year.

Moneycontrol News
first published: Feb 12, 2020 05:38 pm