Factory output growth slips to five-month low

Industrial output had grown at the same rate of 4.4 per cent in March 2017

After growing above 7 per cent for last four months, India's industrial production (IIP) moderated at 4.4 per cent in March, dragged mainly by capital goods and low mining activities, official data revealed on Friday. Data released by the Central Statistics Office (CSO) on Friday showed the index of industrial production (IIP) rose an annual 4.4% in March, slower than previous month's downwardly revised 7% expansion and similar to 4.4% growth in the same month past year.

In terms of industries, eleven out of the twenty three industry groups in the manufacturing sector have shown positive growth during the month of March 2018 as compared to the corresponding month of the previous year.

Capital goods output registered a surprise decline of 1.8 percent against 2.9 percent and 8.8 percent growth in primary goods, and the infrastructure and construction goods segment in March over previous year. The cumulative growth in these three sectors during April-March 2017-18 over the corresponding period of 2016-17 has been 2.3 percent, 4.5 percent and 5.4 percent respectively. The electricity generation output rose at moderated pace of 5.3% and mining output growth eased to 2.3% in April-March FY2018. The gold jewellery segment contracted 66.5 per cent in March compared with the same month previous year, while production of hand tools contracted more than 67 per cent. The industry group "Manufacture of furniture" has shown the highest positive growth of 41.5 percent followed by 20.6 percent in "Manufacture of food products" and 17.2 percent in "Manufacture of motor vehicles, trailers and semi-trailers".

"Faster resolution of stressed assets of banking sector and limiting fiscal slippage will be key factors to watch", Pant said.

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Barring the healthy expansion of consumer durables and construction goods, that were respectively driven by items such as sugar and cement, the other use-based categories recorded a sub-3% growth in March 2018, she said.

Aditi Nayar, principal economist with Icra, said, "The decline in IIP growth in March 2018 relative to February 2018 was led by manufacturing". "Growth in the non-core sectors too slipped during the month". An interesting takeaway is that the monthly pattern is broadly reflective of the full year production.

Going forward, output growth in FY19 is likely to be better than FY18 due to expectation of a normal monsoon, robust vehicle sales, infrastructure focus and sector specific programmes such as housing for all.

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