Factory output shrinks for third straight month in October; RBI forecasts weakness to persist

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Updated: December 12, 2019 5:56:49 PM

IIP growth rate for the mining, manufacturing and electricity sectors for the month of October 2019 stood at (-) 8 per cent, (-) 2.1 per cent and (-) 12.2 per cent respectively.

gdp, gdp annual rate, annual growth, q2 gdp growth, second quarter, indian economy, iip index of industrial productionThe slowdown in manufacturing activity was also reflected in a decline in capacity utilisation to 68.9 per cent in Q2 from 73.6 per cent in Q1.

India’s factory output continued to shrink for the consecutive third month in October 2019, due to weak demand and low production in the manufacturing sector.  IIP growth rate contracted by 3.8 per cent in October, registering the overall growth in the industrial production during April-October at 0.5 per cent, according to the Ministry of Statistics and Programme Implementation.  India’s manufacturing sector has been shrinking in recent months, which further continued in October. Manufacturing Production in India decreased by 2.1 per cent in October 2019 over the same month in the previous year.

“The slowdown in manufacturing activity was also reflected in a decline in capacity utilisation to 68.9 per cent in Q2 from 73.6 per cent in Q1 in the early results of the Reserve Bank’s order books, inventories, and capacity utilisation survey,” said RBI in its December bulletin.

Also Read: What is Index of Industrial Production (IIP)?

IIP growth rate for the mining, manufacturing and electricity sectors for the month of October 2019 stood at (-) 8 per cent, (-) 2.1 per cent and (-) 12.2 per cent respectively, as compared to the same month last year. Also, eighteen out of the twenty-three industry groups in the manufacturing sector have shown negative growth during the month, where ‘Manufacture of computer, electronic and optical products’ has shown the highest negative growth of  (-) 31.3 per cent followed by (-) 27.9 percent in ‘Manufacture of motor vehicles, trailers and semi-trailers’.

Though the manufacturing PMI increased from 50.6 in October to 51.2 in November 2019, driven up by an increase in new orders and output, the reserve bank of India has said that the overall sentiment in the manufacturing sector remained in pessimism in Q3 due to continuing downbeat sentiments on production, domestic and external demand, and the employment condition.

Meanwhile, the manufacturing firms expect weak demand conditions and reduced input price pressures in the third and fourth quarters of the current fiscal year. They also forecast muted output prices, reflecting a further weakening of pricing power.

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