Damage has already been done as in the first eight months of the current fiscal year, IIP barely grew by a pace of 0.6%.
India’s industrial production has expanded in November but there is little relief that it has brought. IIP grew by 1.8 per cent in November after contracting for the straight three months. A favourable base effect and a reduced contraction in the core industries output in November have a major role in improving the industrial production growth in November. However, the damage has already been done as in the first eight months of the current fiscal year, IIP barely grew by a pace of 0.6 per cent, which was much higher at 5 per cent last year.
Adding to the worse, there are not many optimistic expectations for the remaining part of the year as well. Early results of the Reserve Bank’s industrial outlook survey indicate that due to continuing downbeat sentiments on production, domestic and external demand, and the employment scenario, the overall sentiment in the manufacturing sector remained in pessimism in Q3 FY20. Also, the manufacturing firms polled in the same survey expect weak demand conditions and reduced input price pressures in the third and fourth quarters of the current fiscal year.
Meanwhile, both the manufacturing and mining sectors saw positive growth, whereas electricity production fell 5 per cent, after a 12 per cent drop in October. Most of the industry groups in the manufacturing sector have expanded during the month of November 2019, on-year. However, the industry group ‘Other manufacturing’ has shown the highest contraction of 13.5 per cent, followed by 12.6 percent contraction in ‘Manufacture of motor vehicles, trailers, and semi-trailers’. While many industry groups expanded in November, as per use-based classification, the growth rates in primary goods, capital goods, infrastructure & construction goods, and consumer durables, contracted in November 2019.
“Relative to the previous year, growth in manufacturing has been impressive, although it could not build on the past month’s growth momentum. Intermediate goods, which have a weight of over 17% in the index, rose noticeably indicating considerable strength in the production supply chain, but this growth is not yet translating to final production,” said Rumki Majumdar, Economist, Deloitte India.