India’s industrial output contracts 0.7 per cent in Aug as mining, manufacturing slows

Mining sector output plunged 5.6%; manufacturing output fell 0.3% YoY

By: ENS Economic Bureau | New Delhi | Published:October 11, 2016 12:56 am
industrial output, capital goods, india production, india economy, india economy growth, india manufacturing, india manufacturing growth, india business news, business news Capital goods production, an indicator of investment activity in the economy, fell 22.2 per cent in August, in contrast to 21.3 per cent growth recorded in August last year.

Country’s industrial output contracted by 0.7 per cent in August, due to fall in mining and manufacturing sector production and a steep decline in capital goods, as per the government data released on Monday. Industrial output has grown at 6.3 per cent in August last year.

The index of industrial production (IIP) contracted by 0.3 per cent in the April-August period this year, in contrast to 4.1 per cent growth recorded in the same period last year, the data from Ministry of Statistics and Programme Implementation showed. Mining sector output plunged 5.6 per cent in August from a year earlier while manufacturing production output fell 0.3 per cent year-on-year.

Capital goods production, an indicator of investment activity in the economy, fell 22.2 per cent in August, in contrast to 21.3 per cent growth recorded in August last year. During the April-August period, capital goods output shrank by 21.4 per cent, against a growth of 7.2 per cent in the same period last year.

Consumer goods production grew just 1.1 per cent in August from 6 per cent a year ago, pointing to tepid consumer demand. Consumer durables and consumer non-durables have recorded growth of 2.3 per cent and 0.1 per cent, respectively during the month.

During April-August 2016, cumulative growth in mining, manufacturing and electricity sectors has been 0.6 per cent, (-) 1.2 per cent and 5.7 per cent, respectively, over the corresponding period of 2015.

In terms of industries, seven out of twenty two industry groups in the manufacturing sector have shown negative growth during August 2016 as compared with August 2015. The electrical machinery and apparatus group showed the highest negative growth of (-) 49.4 per cent followed by (-) 22.4 per cent in furniture, and (-) 6.6 per cent in wearing apparel; dressing and dyeing of fur.

On the positive side, radio, TV and communication equipment & apparatus has shown the highest growth of 15.2 per cent; followed by 14.6 per cent in other transport equipment; and 12.4 per cent in basic metals. As per use-based classification of the IIP data, basic goods grew at 3.2 per cent while intermediate goods expanded 3.6 per cent during August 2016.

Industry heads and economists said sluggish private investment activity is contributing to lower industrial output, but growth momentum may pick up in coming months due to festive demand.

“Depressed private investment climate and global economic growth continues to impact the manufacturing sector growth in India. Private investment activity remains sluggish and calls for sustained efforts to address the structural bottlenecks” said A Didar Singh, secretary general, Ficci.

“Consumption demand is set to improve appreciably in the coming months, with the kharif harvest forecast at record levels, revised pay and pensions being implemented by the Central government and the impending festive season. While the confluence of such factors should support a higher volume growth in various consumer goods sectors in H2 FY17, the impact of the same on the performance of the IIP may be muted by an adverse base effect for consumer durables,” said Aditi Nayar, vice president & senior economist, ICRA Limited.