Quick estimates show declines in manufacturing, electricity andnegligible growth in mining
India’s Index of Industrial Production (IIP) slid 1.1 per cent in August 2019 amid already worrying signs of an economy negotiating a slippery slope. This pulled down the overall growth of the index this financial year to 2.4 per cent.
The IIP had expanded 4.3 per cent in July.
In August, the index for industrial production for manufacturing shrank 1.2 per cent from the same month a year ago, according to a National Statistical Office (NSO) release on October 11.
Telltale signs of struggle have been there for some time: Passenger vehicle sales in the country dropped 24 per cent in September — the 11th month of decline in a row. Car sales are taken to be benchmark of a market economy’s health.
The index for electricity production also slipped 0.9 per cent. Power output is generally tied to its demand, which in turn signifies economic activity. The mining index managed to grow, but only 0.1 per cent.
Manufacturing worries
Fifteen out of 23 industries in the manufacturing sector shrank in August, according to the NSO statement.
Manufacture of motor vehicles, trailers and semi-trailers tanked the most — 23.1 per cent. Transport equipment manufacture shrank 13.6 per cent. Both the rates were way more than in July.
Machinery and equipment shrank 21.7 per cent while ‘other manufacturing’ slipped 18 per cent. Fabricated metal products shrunk 17.3 per cent, paper and paper products 12.6 per cent, textiles and furnitures 7.6 per cent each and beverages 4.9 per cent.
Growth was seen in mostly less value-adding industries such as basic metal manufacturing. The apparel sector, though, notched up a 10.3 per cent growth.
Going by use, capital goods shrank 21 per cent while infrastructure and construction goods fell 4.5 per cent. On the other hand, intermediate goods expanded 7 per cent and primary goods 1.1 per cent.
The Narendra Modi government has tried to shrug off economic worries, amid widespread complaints of lack of employment and poor income generation. Finance Minister Nirmala Sitharaman cut corporate taxes, hoping to boost consumer demand and spending. The Reserve Bank of India has been reducing lending (and borrowing) rates to increase the availability of funds.
Agriculture has been lacklustre for quite some time, not helped by a series of droughts. The monsoon this year was delayed and erratic while there are complaints of droughts in many states.
In such a situation, shrinking manufacturing can increase job losses while signifying that consumer demand remains muted.
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