The government’s efforts to drive ‘Make in India’ to success have not yet reflected in the country’s industrial output growth. India’s Index of Industrial Production (IIP) growth is expected to fall to 2 per cent in the current financial year 2019-20, said FICCI in its Economic Outlook Survey. “The participating economists have put forth a median growth forecast for IIP at 2 per cent for the year 2019-20, with a minimum and maximum range of 0.4 per cent and 4.0 per cent respectively,” the survey said. The new IIP estimate for this fiscal year is half of India’s industrial production growth at 4.4 per cent in the previous FY18.
As capacity utilization in major sectors like automotive fell and capital goods production continued to fall, the overall production output remained at lower levels. While IIP contracted for three consecutive months in FY20, it expanded at a modest pace in November 2019. A favourable base effect and a reduced contraction in the core industries output played a major role in improving the industrial production growth in November. However, the overall year barely saw 0.6 per cent growth cumulatively in the first eight months of the fiscal, thus, bringing down the overall estimations for the year. In the period April-November of the last fiscal, IIP was much higher at 5 per cent.
Meanwhile, the Reserve Bank’s industrial outlook survey indicated that due to continuing low 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 that had polled earlier too expected weak demand conditions and reduced input price pressures in the third and fourth quarters of the current fiscal year. FICCI, on the other hand, has estimated 4.7 per cent growth in IIP for the fourth quarter of the current fiscal. The industry body has also expected WPI and CPI to grow at 2 per cent and 4.3 per cent, respectively.