India Inc. sees industrial growth enter negative zone

India's industrial growth entered negative territory in June shrinking by 0.1 per cent mainly due to decline in manufacturing and capital goods sectors.

The data comes at a time when Economic Survey Volume 2 on Friday said that it will be difficult for GDP to touch high growth target of 7.5 per cent in the current fiscal as predicted earlier by the government.

“Unsurprisingly, the unfavourable base effect, the reduction in inventories ahead of the transition to the GST, and slide in growth of non-oil exports culminated in a marginal contraction of 0.1 per cent in the IIP in June 2017, a 48-month low performance,” said Aditi Nayar, principal economist at Icra.

She said that as expected, inventory paring prior to the GST resulted in a mild contraction in manufacturing output of 0.4 percent in June 2017. As many as 15 of the sub-sectors of manufacturing recorded a year on year contraction in June 2017.

Mining growth stood at a low 0.4 per cent in June 2017, dampened by the sharp contraction in coal output.

“The slide in growth of electricity generation to 2.1 per cent in June 2017 from 8.3 per cent in May 2017 is partly attributable to the waning of the favourable base effect. The sequential downturn in June 2017 was led by a contraction in thermal electricity generation, as well as a moderation in the pace of growth of hydro electricity generation,” said ICRA.

Industrial output growth during April-June slowed down to 2 per cent from 7.1 per cent in the corresponding period last year.