A contraction in manufacturing output, especially capital and consumer goods, pulled down industrial growth to a 17-month low of 0.5 per cent in November.
This comes just a month after growth had scaled a 11-month high of 8.4 per cent in October.
Economists attributed the subdued numbers to post-festive dullness in activities and a high base effect. The index of industrial production (IIP) had grown 8.5 per cent in November 2017.
The manufacturing segment, which constitutes the bulk of the index of industrial production (IIP) at 77.6 per cent, contracted by 0.4 per cent in November against 8.24 per cent rise in October.
The October manufacturing number was almost double the 4.6 per cent in September. The numbers show continued volatility in the IIP, despite change in the index last year. The two other sectors in the IIP — electricity and mining — also saw lower growth in November than in the
previous month, the data released on Friday showed.
Electricity generation rose 5.1 per cent in November, less than half the 10.8 per cent rise in the previous month. On the other hand, mining grew by 2.7 per cent in November, against 7.24 per cent rise in October.
“The IIP number has disappointed, coming in at a flattish level of 0.5 per cent. While the adverse base and the post-festive winding down of momentum, along with fewer working days, were expected to lower IIP growth, the magnitude of correction has been sharper. Tighter domestic financing conditions may also have played a part,” said Shubhada Rao, chief economist, YES Bank.
Of 23 sub-sectors within manufacturing, 13 recorded a year-on-year contraction, as compared to two in September. Major sectors such as metals and motor vehicles brought down growth.
On the other hand, apart from furniture, computer hardware production managed to see healthy growth. This is after the government pushed manufacturing in the sector on a sustained basis over the past six months, through a series of benefits and the phased manufacturing programme aimed to reduce imports of electronics goods.
Most of all, the capital goods segment, which connotes investments, saw output growth turning to negative with a 3.4 per cent contraction. The segment had seen output growth jump to a high 17 per cent in the previous month. Driven by machinery and heavy transport, capital goods production has grown every month of the current fiscal year till now.
“We expect GDP growth for Q3 and Q4 FY2019 to be well below the 7 per cent mark, taking the full-year estimate to be around 7.2 per cent. If economic activity continues to stay soft, then core inflation pressures could also see some easing, thereby increasing expectations of accommodation in the next monetary policy meeting,” said B Prasanna, head, Global Markets Group, ICICI Bank.
In November, consumer durables also contracted 0.9 per cent, a severe fall from the nearly 3.1 per cent jump in October. The same was true of consumer non-durables, which had commanded a growth rate of 8.7 per cent in October but saw production contract by 0.6 per cent in November. Infrastructure goods stood out as the only use-based category recording growth, albeit the 5 per cent rise in November was smaller than the 8 per cent rise in the previous month.
Infrastructure goods stood out as the only use-based category recording growth, albeit the 5 per cent rise in November was smaller than the 8 per cent rise in the previous month.