Industrial output shrank at its lowest rate in more than six years in August, reflecting the impact of an economic slowdown that could prompt the central bank to cut its key policy rate for the sixth time in December.
Annual industrial output contracted 1.1% in August compared with 4.6% growth in the previous month, government data showed. It was the worst performance since a 1.7% contraction in November 2012. The IIP last time contracted by 1% in the month of June 2013.
The Index of Industrial Production (IIP) had expanded by 4.8% in August 2018.
The manufacturing sector, which contributes over 77% to the IIP, showed a decline of 1.2% in output during August 2019 as against a growth of 5.2% in the same month of last year. The previous low in the manufacturing segment was recorded at (-) 1.8% in October 2014.
Consumer durables output too declined by 9.1% in August 2019 as against 5.5% growth in the same month of 2018. Another poor-performing segment was infrastructure/construction goods. It showed a decline of 4.5% in August 2019 as against a growth of 8% in the corresponding month of last year.
‘Intermediate goods’ sector, however, showed a healthy growth of 7%, up from 2.9% in the year-ago month. Consumer non-durables segment posted an expansion of 4.1% in August. This compares with 6.5% expansion in August 2018.
In terms of industries, 15 out of the 23 industry groups in the manufacturing sector have shown negative growth during August 2019 as compared to the corresponding month of the previous year.
Subdued inflation and an economic slowdown have prompted the Reserve Bank of India (RBI) to cut interest rates by a total of 135 basis points this year, including a 25-basis-point cut last week, making it the most aggressive central bank in Asia.
India’s passenger vehicle sales slumped 23.7% in September, the 11th straight month of declines, prompting an industry body to flag more job cuts if sales failed to pick up soon.
Car and auto component makers have cut thousands of jobs and halted some production as the industry grapples with various challenges amid a broader economic slowdown. The government stepped in last month, announcing a corporate tax rate cut to boost manufacturing and lift growth.