Industrial output growth faltered in August, dipping to a 3-month low of 4.3 per cent as manufacturing growth slowed down and mining activities contracted.
In July, the Index of Industrial Production (IIP) had moderated slightly to 6.6 per cent, down from the 6.8 per cent in June. The cooling of growth can be attributed mainly to the manufacturing segment, constituting the bulk of the index at 77.6 per cent, growing by only 4.6 per cent, significantly lower than the 6.9 per cent rise in July.
The growth in August disappointed economists. “Clearly, the IIP growth is not showing the buoyancy that the onset of festival season should do,” said Devendra Kumar Pant, chief economist at India Ratings & Research.
Among 23 sub-sectors within manufacturing, seven recorded a year-on-year contraction, up from six in July. Industries such as auto, pharma, food, metals and non-metallic products, among others, continued to do well. Furniture and apparels remained the largest growth pullers. On the other hand, electronics did worse despite the government pushing for growth through a series of benefits and the phased manufacturing programme aimed to reduce imports of electronics goods.
Economists said higher growth rates within manufacturing resulted due to favourable base effect of negative growth in 2017 for manufacturing and the overall industry.
On the other hand, mining output contracted by 0.4 per cent in August, down from the 3.5 per cent in July, in line with expectations. Despite this, electricity generation remained high, growing by 7.6 per cent in the latest month, up from the 6.6 per cent rise in July.
Economists had pointed out that above 6.5 per cent growth rates sustaining over the next 2-3 quarters will be crucial for hitting the 5-6 per cent mark for the year.
The sensitive capital goods segment, which connotes investments, saw an output rise by 5 per cent, slightly recovering from the low 2.79 per cent rise in the previous month. The latest figures still remained paltry compared with the 9.8 per cent rise back in June.
“Elsewhere, at the used based level, infrastructure goods and consumer non-durables grew in high-single digit in August. However, cumulatively in the April-August period of the current financial year, the sector that stands out recording high single digit growth are electricity at broad-based level and consumer durables, capital, infrastructure and primary goods,” Pant said.
In August, consumer durables grew by 5.2 per cent. In July, the segment had shown signs of firmly escaping the spell of low growth and contraction seen over the past few months, with growth jumping more than 14.4 per cent. Infrastructure/construction goods segment grew in August to 7.8 per cent.