Aug IIP contracts 1.1 per cent, hits 7-year low
After a decent growth in the month of July, the industrial production has raised concerns about the economy as the August data points out sharp contraction. The latest industrial production data, gauged by Index of Industrial Production (IIP) for the month of August contracted by 1.1 per cent compared to growth of 4 per cent in July 2019 and compared to growth of 4.8 per cent in August 2018.
The IIP hit seven year low. All the three sectors - mining, manufacturing and electricity contributed to the IIP de-growth. Moreover, if it is compared to the previous year data, then the data shows that some sectors have logged sharp contraction this year.
The mining sector registered a growth of mere 0.1 per cent in August 2019 compared to 4.9 per cent in July 2019 and de-growth of 0.6 per cent in August 2018.
On the other hand, the manufacturing sector marked a contraction of 1.2 per cent against growth of 4.2 per cent in July 2019 and growth of 5.2 per cent in August 2018. In terms of industries, fifteen out of the twenty three industry groups in the manufacturing sector have shown negative growth during the month of August 2019 as compared to the corresponding month of the previous year.
Meanwhile, growth in electricity sector also contracted by 0.9 per cent as compared to growth of 4.8 per cent in July 2019 and growth of 7.6 per cent in August 2018.
At the same time, capital goods contracted for the eighth consecutive month and this time with a remarkable change. Growth in capital goods contracted by 21.0 per cent in August as compared to de-growth of 7.1 per cent in July 2019 and compared to growth of 10.3 per cent in August 2018.
On the other hand, the intermediate goods have continued to show solid growth at 7.0 per cent in August 2019, although lower from 13.9 per cent growth in the previous month. Consumer non-durables also grew at 4.1 per cent, although lower than growth of 8.3 per cent in July 2019 and also lower than growth of 6.5 per cent in August 2018. on the back of robust growth in manufactured food products, which grew at 23.4 per cent.
On the other hand, growth in consumer durables shrank for third consecutive month at 9.1 per cent in August 2019 as compared to de-growth of 2.7 per cent in July 2019 and compared to growth of 5.5 per cent in August 2018. The sharp drop in consumer durables can be attributed to the massive drop in automobile sales.
Such sharp fall in growth of manufacturing, consumer durables and capital goods segment may exert immense pressure on the government to announce some more stimulus measures that can help the economy to bounce back.