Industrial production in volume terms declined in March for the first time in 21 months — by 0.1 per cent — against a growth rate 0.1 per cent in the previous month as manufacturing continued to contract for the second month in a row and mining growth was muted.
This might pull down the growth of gross domestic product (GDP) in FY19, other things remaining the same.
In manufacturing, capital goods production continued to fall, which will affect economic growth. Besides, intermediate goods saw a decline for the second consecutive month while consumer durables showed a contraction in March against slight expansion in the previous month. This means both investment and discretionary consumption are on the downward slide.
The March numbers pulled down the index of industrial production (IIP) to 3.6 per cent in 2018-19 against 4.4 per cent in the previous year.
After the BJP came to power in 2014, growth in FY19 was the lowest after 2015-16, which saw 3.4 per cent growth.
This might affect the GDP numbers for FY19 and the fourth quarter of the year. The second advance estimates have pegged economic growth at 7 per cent for the year, the lowest under the present government. Fourth-quarter growth slowed to 6.5 per cent against 6.6 per cent in the third quarter, according to advance estimates.
The Q4 growth number may further decline since industrial production growth stood at 0.46 per cent during the March quarter, against 3.8 per cent in Q3. The IIP takes care of almost one-fourth of industry’s number in GDP, with the remaining accounted for by MCA 21 and stock exchanges filings.
The contraction in IIP for March was surprising since the eight-industry core sector, which constitutes 40 per cent of the index, rose 4.7 per cent — highest in seven months.
“Industrial growth for March is below our expectations of 3.9 per cent, which was predicated on very high core sector growth,” said Madan Sabnavis, chief economist, CARE Ratings.
This meant the segments outside the core sector did not perform well. For instance, capital goods declined 8.7 per cent in March, almost the same at 8.9 per cent in the previous month. This is one more corroboration of the fact that investment in the private sector has been slowing. Besides, intermediate goods fell 2.5 per cent though at half the rate of 5 per cent in February.
Also, consumer durables contracted 5.1 per cent in March compared to 1.2 per cent growth in the previous month.
This was in store as the industry data earlier showed that auto market leader Maruti Suzuki saw a decline of 0.7 per cent in car sales for March.
The IIP data showed TV sets contracted 59.5 per cent in March.
“Declining growth in primary goods and the deepening contraction of intermediate goods and weakness in both investments and consumption activities suggest very fragile industrial activities in the near term,” said Devendra Pant, chief economist, India Ratings.