In More Bad News for Economy, Industrial Output Shrinks by 1.1% in August

New Delhi: In yet another disastrous news for the economy, which is already reeling under a slowdown, the country’s industrial output declined by 1.1% in August due to poor performance by manufacturing, power generation and mining sectors, official data released on Friday showed. 

This contraction in factory output comes after the index of industrial production (IIP) had picked up in July 2019, increasing to 4.3%.

According to an official release, 15 out 23 industry groups in the manufacturing sector showed negative growth in August 2019, with the group that includes motor vehicles showing the maximum negative growth at -23.1%, followed by (-) 21.7% in ‘Manufacture of machinery and equipment n.e.c.’ and (-) 18% in ‘Other Manufacturing’

The fall is the steepest in the last 81 months, Devendra Kumar Pant, chief economist at India Ratings and Research, told BloombergQuint.

The IIP had expanded by 4.8% in August 2018. 

The manufacturing sector, which contributes over 77% to the IIP, showed a decline of 1.2% in output during August 2019, against a growth of 5.2% in the same month of last year.

Electricity generation declined by 0.9% against an expansion of 7.6% in the year ago month while the growth in the mining sector was flat at 0.1%.

In a reflection of low investment activity in the economy, capital goods output contracted by 21% in August against a contraction of 7.1% in the previous month.

The depressing news for the economy comes ahead of Diwali and during the festival season, which was widely expected to lift demand.  However, consumer sentiment doesn’t seem to have picked up to the desired extent.

“It appears pre-stocking due to festive demand in September and October has not taken place…Pant told BloombergQuint, adding that the policy measures announced by the government recently were supply side interventions and were unlikely to boost demand. 

The IIP for mining, manufacturing and electricity sectors for August 2019 showed growth rates of 0.1%, (-) 1.2% and (-) 0.9% as compared to August 2018. 

In August, industry group ‘Manufacture of basic metals’ showed the highest positive growth of 11.8% followed by 11.3% in ‘Manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials’ and 10.3% ‘Manufacture of wearing apparel’, official data showed.