Factory output at 81-month low

India’s factory output contracted 1.1% in August as against a growth of 4.2% reported a month ago, recording the poorest performance in 81 months and signalling a deepening economic downturn. The previous low in IIP was (-) 1.7% in November 2012.

This may pave way for further monetary easing by the central bank for the sixth consecutive time in December. Data released earlier this month by the industry department showed India’s eight infrastructure sectors constituting about 40% of Index of industrial production (IIP) contracted for the first time in more than four years in August by 0.5%. The Monetary Policy Committee of the RBI earlier this month cut policy rates by 25 basis points.

For the first time this fiscal, bank credit growth slowed to single digit, printing in at a low 8.79% at ₹97.71 lakh crore in the fortnight to September 27, according the latest data from the Reserve Bank of India (RBI). In the year-ago fortnight, the advances had stood at ₹89.82 lakh crore. In the previous fortnight ending September 13, bank credit had grown 10.26% to ₹97.01 lakh crore. Deposits growth too slowed to 9.38% to ₹129.06 lakh crore from ₹118 lakh crore a year ago, the RBI said, adding deposits had grown 10.02% in the fortnight to September 13. On annualized basis, non-food credit growth decelerated to 9.8% in August 2019 from 12.4% in August 2018. Loans to agriculture and allied activities increased 6.8% in August compared to an increase of 6.6% last year same month. Credit growth to the services sector decelerated to 13.3% in August from 26.7%. Personal loans growth moderated to 15.6% in August 2019 from 18.2% in August 2018. However, advances to the industry accelerated during the reporting period more than doubling by 3.9% in August from 1.9% in August 2018.