September IIP
contracted by 4.3%, at a much sharper pace, as against -1.1% in
August
A slowdown was
witnessed in manufacturing sector, which contracted by 3.9% in September as
compared to 4.8% growth a year ago
India’s
industrial output in September contracted for the second consecutive month at
4.3% as all components— mining, manufacturing and electricity—saw a fall in
output during the month, pointing towards a deepening economic downturn. The
IIP grew 4.5% in September 2018 and contracted 1.1% in August 2019.
Data released by the statistics department showed capital goods,
which indicate investment demand, shrank by a whopping 20.7% while both
consumer durables and consumer non-durables also contracted.
A slowdown was witnessed in the manufacturing sector, which
contracted by 3.9% in September as compared to 4.8% growth a year ago.
The power generation sector output dipped 2.6% in September,
compared to 8.2% growth in the year-ago period.
Mining output too fell by 8.5% in the month under review as
against 0.1% growth in the corresponding period last fiscal.
Core sector data, which measures the eight infrastructure
sectors had contracted 5.2% in September, worst in 14 years. Core sector
constitutes 40% of industrial production.
The persistent slowdown in industrial growth may force the central
bank to go for another round of policy rate cut in December. Indian
businesses have been battling demand slowdown and liquidity crunch, which
resulted in economic growth rate cooling to a six-year-low of 5% in the June
quarter, while private consumption expenditure was at an 18-quarter-low of
3.1%.
Business confidence in India dipped to its lowest in six years
in August-October quarter, according to the latest survey released by the Delhi
based think tank National Council of Applied Economic Research (NCAER) on
Monday.
According to the survey, the quarterly Business Confidence Index
(BCI) dipped to 103.1, falling 15.3% from the July quarter. The BCI was lower
than the current level at 100.4 in October, 2013.
“The numbers suggest a deep and all-pervasive worsening of
business sentiments," NCAER said in a statement.
The International Monetary Fund last month cut its growth
forecast for India to 6.1% from 7% earlier for 2019-20, citing corporate and
environmental regulatory uncertainty, together with concerns about the health
of the non-bank financial sector, that has weighed on consumption demand. On
Friday, rating agency Moody’s cut India’s sovereign outlook to
negative from stable citing lack of intent for reforms in India and a prolonged
economic slowdown. It maintained a second lowest investment grade rating for
India.
The Narendra Modi administration has taken a series of steps to
reverse the growth slowdown, including a cut in the corporate tax rate in
September to 22% from 30% for companies not availing of any tax breaks and to
15% from 25% for new manufacturers. The Cabinet cleared a proposal last week to
set up a ₹25,000
crore debt fund to finish incomplete housing projects, a move that is expected
to boost cement and steel sectors in the coming months.
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