After three months of contraction, factory output grew 1.8 per cent in November 2019, primarily driven by improvement in manufacturing output and a favourable base effect, data from the National Statistical Office showed.
Manufacturing sector — which carries a weight of 77.63 per cent in the Index of Industrial Production (IIP) — grew 2.7 per cent in November 2019 as against 2.3 per cent contraction in the preceding month and 0.7 per cent contraction in the corresponding period in 2018, the data showed.
Encouraging signs, but too early to be labelled recovery
After three months of contraction, industrial output has recovered in November. The rise has been mainly due to a favourable base effect and manufacturing growth, even as investment demand and consumer non-durables posted a contraction. Though IIP has risen, experts are cautious to term it as a recovery even though a low base effect is likely to support the growth going ahead but key use-based sectors such as capital goods, consumer durables, infrastructure goods are still showing contraction.
IIP growth was at 0.2 per cent in November 2018, while for October 2019, the output was further revised down to (-)4 per cent from (-)3.8 per cent estimated earlier. Cumulatively, the industrial output for April-November grew at a meagre 0.6 per cent as against 5.0 per cent in the same period a year ago.
Industrial output growth in November was supported by a rise in intermediate goods output and consumer non-durables. Intermediate goods output recorded a growth of 17.1 per cent in November as against a 4.1 per cent contraction last year, while consumer non-durables — consisting of mainly the fast-moving consumer goods — posted a 2.0 per cent growth as against 0.3 per cent contraction last year, reflecting pickup due to festival demand.
However, capital goods output — a measure of investment demand — contracted for the eleventh straight month, declining 8.6 per cent in November 2019 as against a 4.1 per cent contraction in the corresponding month in 2018 but improved from 22.0 per cent contraction in October 2019, the data showed. Consumer durables output stayed in the negative territory for the sixth consecutive month by contracting 1.5 per cent in November as against a contraction of 3.0 per cent last year and 18.8 per cent contraction in the previous month.
Electricity output stayed in the negative territory for the fourth consecutive month, contracting 5 per cent as against a growth of 5.1 per cent in November 2018. Mining sector output decelerated to 1.7 per cent from 2.7 per cent in the year ago month.
Analysts said though industrial output has turned positive, it may be too early to term it as a recovery since a low base is going to support IIP growth in the coming months till March.
“India Ratings and Research believes turnaround in factory output growth from de-growth to growth though is a welcome sign, it still cannot be interpreted as some kind of a green shoot on the industrial front as a number of key use based sectors, like consumer durables, capital goods, basic goods and infrastructure goods are still showing de-growth. Unless and until majority of the use based sectors show positive growth on a sustained basis, it would be difficult to believe that Indian industrial sector has come out of the woods,” Sunil Kumar Sinha, principal economist, India Ratings said.