Manufacturing drags Nov IIP to 17-month low
Factory output growth slumped to a 17-month low of 0.5 per cent in November 2018, plunging from 8.5 per cent in the same month of the previous year.
The latest Index of Industrial Production (IIP) print was also lower than the upward revised 8.4 per cent year-on-year growth recorded in October 2018.
However, the good news is that overall IIP growth for AprilNovember 2018 came in at 5 per cent, much higher than the 3.2 per cent in the corresponding previous period.
The main reason for the slump in factory output growth in November 2018 is the poor show from the manufacturing sector, which contracted 0.4 per cent in November 2018, against the robust 10.4 per cent growth seen in November 2017. While mining grew 2.7 per cent (1.4 per cent), electricity output grew 5.1 per cent (3.9 per cent).
The cumulative YoY growth in mining, manufacturing and electricity in the April-November 2018 period was 3.7 per cent, 5 per cent and 6.6 per cent, respectively.
Madan Sabnavis, Chief Economist, CARE Ratings, attributed the sharp fall in IIP growth to three main factors: “Lower post festival demand, lower rural spending and a liquidity crunch affecting lending for auto, especially tractors,” he told BusinessLine.
Sunil Sinha, Principal Economist, India Ratings, said factory output growth, after averaging 5.6 per cent till October, suddenly dipped to 0.5 per cent in November 2018.