Modi 2.0: Prime Minister Modi will have to take urgent steps in the next budget to arrest the slowdown in the manufacturing sector.
Economic Woes: Prime Minister Narendra Modi will face the acid test of reviving the growth of manufacturing sector in the first full budget of his second term. In the first term, he had set an ambitious target of increasing the share of manufacturing sector in the GDP to 25% and launched his flagship programme ‘Make in India’ to provide fillip to manufacturing in the country. However, it remained stuck at the same level of previous UPA government throughout the tenure of his first government.
The challenge for the Prime Minister and his team has become even more daunting as the Index of Industrial Production (IIP) has declined in absolute terms in March this year, first time since June 2013.
The absolute decline in March this year was preceded by other signs of a slow down in manufacturing activity and economy in general.
In February this year, the IIP index registered a minuscule growth of 0.7% and recorded a growth of just 1.7% in January this year.
The average growth rate of the Index of Industrial Production, a crucial measure of economic activity in the country, was just 1.16% in the last four months of the previous fiscal, with the highest growth recorded in December 2018 when it was 2.6%.
“Economy is in the doldrums. Manufacturing sector is facing an acute crisis,” said Tapan Sen, former Rajya Sabha member.
Manufacturing which has a weight of more than three-fourth in the Index of Industrial Production registered a decline of 0.4% in March this year in comparison with the same period last month.
The decline in manufacturing sector is attributed to three things – a sharp decline of 8.7% in the production of capital goods, another sharp decline of 5.1% in consumer durables and a decline of 3.5% in production of intermediate goods.
“This is for the first time that IIP has declined in absolute terms in the month of March this year. This is a clear failure of Modi government’s economic policies,” Tapan Sen, a member of Politburo of Communist Party of India (Marxist) told Financial Express Online.
As per the latest official data, the average annual growth of factory output was just 3.6% for the FY 2018-19. It’s lower than the growth of 4.7% recorded in FY 2017-18.
However, what may be more worrying for the government that this slowdown in manufacturing activity gathered pace in the last four months of the previous fiscal, a clear sign of slowdown in the economic activity in the country.