Slowdown pain deepens as industrial output dives; good days remain elusive for Indian economy

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Updated: November 11, 2019 6:13:16 PM

There seems to be no respite in sight for the Indian economy from an ongoing slowdown, which now appears to be deepening with the passage of every month.

IIP growth rate in july 2019, July 2019 IIP, industrial production growth, Index of Industrial Production, Ministry of Statistics and Programme Implementation, manufacturing sector growthIndustrial production figures for the previous month of August were revised to show a deeper contraction at 1.4%.

There seems to be no respite in sight for the Indian economy from an ongoing slowdown, which now appears to be deepening with the passage of every month. The latest to hit hard is the data on industrial output, which showed that India’s IIP (Index of Industrial Production) fell by 4.3% on-year in September, indicating a severe contraction in the activity. Consumer durables production was down by 9.9%; manufacturing slipped by 3.9%, and capital goods output fell by as much as 20.7% on-year in the month. Industrial production figures for the previous month of August were revised to show a deeper contraction at 1.4% than that recorded at 1.1% in the previous reading. Also, the power generation sector output slipped by 2.6% in September, as compared to 8.2% growth in the same period last year. Mining output has also fallen by 8.5% in the month as against 0.1% growth in September last year.

The September IIP has hit the slowest pace since Feb 2013 and is now at about seven-year low. The same is also down by analysts forecasts as Reuters had forecast the September industrial output to fall by 2%. The cumulative growth in April-September over the corresponding period of the last year was at 1.3%.

The IIP contraction suggests the supply side is adjusting to the acute demand compression in the economy, dampening hopes of an industrial recovery anytime soon to prop up faltering GDP growth.

Meanwhile, the third quarter of the current financial year also started on a depressing note with services PMI also indicating a contraction in services output for the second month in a row in October. The confidence in the service sector is the lowest in nearly three years owing to fall in services exports, which is on a 4-month low, and the rise of input cost to a one-year high. Further, the contraction in the services sector makes a severe impact on the economy as the sector contributes to more than half of the country’s economy. The services GVA touched a seven-quarter low of 6.9% in the first quarter of FY20, as compared to 8.4% in the previous quarter.

The hike in input cost is also a reason why the services sector has slowed down in the last two quarters. The average price charged have increased owing to higher freight, fuel, material, vegetable and staff cost which has raised the input price inflation to a year high.

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