July IIP at 4.3 per cent, lifts rate-cut hopes

After a poor show in the month of June, the industrial production has marked a good growth in the month of July. The latest industrial production data, gauged by Index of Industrial Production (IIP) for the month of July came in at 4 per cent compared to 1.1 per cent in June 2019. However, it was lower than the IIP growth of 6.5 per cent in July 2018.

Compared to June data, all three sectors - mining, manufacturing and electricity contributed to the IIP growth. However, if it is compared to the previous year data, then some sectors have logged sharp contraction this year.

The mining sector registered a growth of 4.9 per cent in July 2019 against 3.4 per cent in July 2018. On the other hand, the manufacturing sector marked a growth of 4.2 per cent compared to growth of 7.0 per cent in July 2018. Meanwhile, the electricity sector posted a growth of 4.8 per cent against 6.6 per cent in July 2018.

However, capital goods contracted for the seventh consecutive month at 7.1 per cent in July 2019 compared to growth of 2.3 per cent in July 2018. IIP growth was, however, largely driven by solid growth in the intermediate goods, which grew 13.9 per cent compared to growth of 1.3 per cent in same month previous year. Consumer non-durables also grew at a solid pace of 8.3 per cent on the back of robust growth in manufactured food products, which grew at 23.4 per cent.

On the other hand, consumer durables shrank for second consecutive month at 2.7 per cent compared to growth of a growth of 14.1 per cent in July 2018. The sharp drop in consumer durables can be attributed to the massive drop in automobile sales. Such sharp fall in growth of consumer durables segment may exert immense pressure on the Reserve Bank of India (RBI) to cut policy rates to boost growth.