Industrial output shrinks for first time in nearly 2 years

NEW DELHI: India’s industrial output contracted in March — the first time in nearly two years — after being dragged down by a decline in key manufacturing and capital goods sectors. The development poses a tough challenge for the new government, which assumes office later this month, to reverse the slowdown. Data released by the Central Statistics Office (CSO) on Friday showed industrial output fell 0.1% in March, below February’s downwardly revised 0.07%, and 5.3% posted in March 2018.

The manufacturing sector, which accounts for over 77% of the index of industrial production (IIP), contracted 0.4% during the month, compared to a 5.7% expansion in March 2018. The latest data comes against the backdrop of a slowdown in several sectors such as automobiles. GDP growth in the October-December quarter of 2018-19 slowed to 6.6%, while CSO has estimated growth for 2018-19 at 7%, marginally down from the previous estimate of 7.2%.



The latest purchasing manager’s index (PMI) showed factory activity slowed to an eight-month low in April. A finance ministry report also said that the economy appears to have slowed down in 2018-19 and had listed some challenges that need to be addressed for faster expansion. Economists said the sharp decline in growth was worrisome and much would depend on the policies that the new government adopts to reverse the slowdown.

“Consumer spending will increase only gradually and hence there would be a tendency for growth to be subdued in the first few months of FY20. The important part will be government expenditure and the decision taken on capex before the main budget is introduced,” said Madan Sabnavis, chief economist at Care ratings. The RBI is expected to cut interest rates in June.