Industrial output growth slows to 3.1% in April on lagged note ban effect

Mining and power generation boost April figures under new series

Industrial output in the country rose by 3.1 per cent in April from a year earlier, mainly due to an increase in electricity generation and mining. 

This is the second time the figures for factory output, measured in terms of the Index of Industrial Production (IIP), have been 

calculated with 2011-12 as the base year.

The new-look IIP as well as the wholesale price index had been introduced last month with the aim of capturing the economic data in a more comprehensive manner. 

Under the new series, IIP growth had been 3.7 per cent in March, while it had been 2.5 per cent going by the old series. The slowdown in growth could be due to the lagged effect of demonetisation, which might play out even in the first quarter of FY18, said Madan Sabnavis, chief economist at CARE Ratings.

The April figures, released by the government on Monday, showed that electricity generation was up by 5.4 per cent in April. However, growth in mining slowed considerably to 4.2 per cent. The data show that manufacturing, which constitutes more than three-fourths of the index, rose by 2.6 per cent. This is mainly on the back of a rise in consumer non-durables, which rose by 8.3 per cent, and the newly-introduced segment of construction goods, which rose by 5.8 per cent.

However, the volatile capital goods segment, which is generally taken as an indicator of industrial activity, fell by 1.3 per cent in April. The new series of data paints a healthier picture of the economy in 2016-17 than the old one did. However, the impact of note ban persisted on industrial production, particularly manufacturing, which declined in March over February. Besides, investments are yet to pick up.

Nuts & bolts of factory growth

—Electricity generation grows 5.4% against rise of 6.17% in March

—Manufacturing production up 2.6% in April, against growth of 2.4% in March
—Mining output goes up 4.2% compared to 10.25 % rise in March

Graphic: Retail inflation falls, factory output slows