In November 2019, the industrial output based on Index of Industrial Production (IIP) saw a trend reversal and it grew by 1.8% as against the sustained contraction in the previous 3 months. The growth during the month has been 1.6% higher than the comparable month in the previous year (0.2% in November 2018).
During the first 8 months of fiscal year 2019-20, the IIP grew at a lacklustre pace of 0.6% compared with the 5% growth in the corresponding period last year.
The growth during the month has largely been aided by the low base effect which pushed up the growth in the manufacturing sector. Capital goods and infrastructure continued to see contraction during the month on account of weak investment climate and subdued consumer demand in the economy.
There has been a trend reversal in the mining and quarrying and manufacturing where the industrial output registered positive growth against the contraction seen in the past few months while the electricity sector continued to witness contraction for the consecutive 4th month.
Mining sector grew at 1.7% as against the contraction by 8% seen in the previous month. It was however lower than the 2.7% growth seen in November 2018.
The manufacturing sector registered a positive growth at 2.7% compared with contraction seen in the previous 3 months as well as in the corresponding month a year ago (-0.7% in November 2018). The growth has come mainly on account of favourable base rather than pick up in the demand conditions in the economy.
Out of 23 industries in the manufacturing sector, 13 industries registered a growth in the industrial output in November 2019.
Double digit growth was seen in wood products (23.2%) and basic metal (12.9%) whereas the industries registering contraction are motor vehicles (12.6%), computers (-9.9%), printing and media (-7.8%) among others.
Electricity sector registered sustained contraction for 4th successive month at -5% as against the 5.1% growth seen in November 2018.
Within the used based classification, all segments barring intermediate goods and consumer goods - non-durables have registered contraction in the industrial output.
For the consequent 11th month, the output in the capital goods contracted by 8.6% compared with the -4.1% growth in November 2018. Subdued investment climate and slowdown in the motor vehicles, machinery among others have dragged down the output in the segment.
Primary goods, which has the highest weight in the IIP, contracted by 0.3% as against the 3.2% growth in November 2018.
Consumer durables contracted for the consistent 6 months at 1.5% compared with de-growth at 3% in the comparable month a year ago. Weak demand conditions have seen to weigh on the consumer goods segment.
Infrastructure sector too saw a decline in the industrial output at 3.5% - a sustained contraction for the 4th month in a row. In November 2018, the segment grew at 4.8%.
Intermediate goods grew at 17.1% compared with -4.2% decline in November 2018.
Consumer non-durables grew at subdued 2% as against -0.3% in November 2018.
The cumulative growth during the first 8 months of the fiscal year 0.6% compared with 5% growth in the comparable period a year ago. All the sectors witnessed lacklustre growth. Mining and quarrying (-0.1%) contracted while the manufacturing (0.9%) and electricity sector (0.8%) witnessed growth.
Within the used based classification, capital goods (-11.6%), infrastructure (-2.7%) and consumer durables (-6.5%) saw a decline in the industrial output whereas the industrial output expanded in intermediate (12.2%) and consumer non-durables (3.9%). Primary goods grew at a lacklustre pace at 0.1%.
We are expecting some revival in the coming months along with a favourable base for the rest of the months. On this
premise, we are expecting the industrial output to grow around 4% by March 2020.
Madan Sabnavis, Chief Economist
Dr. Rucha Ranadive, Senior Economist
Rachna Gupta, Manager – Training