SLUGGISH INDUSTRIAL OUTPUT GROWTH
Total Industrial Output Growth Fell to 17-Month Low to 0.5% in November 2018.
Monthly industry data has been released on January 11, 2019 by Central Statistical Organization (CSO). Hence my analysis of the report here under.
India logs sluggish growth as per the latest CSO report of Index of Industrial Production (IIP). IIP is a composite indicator to understand and measure the growth rate of various industry groups in an economy like mining, manufacturing and electricity sectors and also steel, refinery products, crude oil, coal, cement, natural gas and fertilisers.
Monthly industry data has been released on January 11, 2019 by Central Statistical Organization (CSO). Hence my analysis of the report here under.
India logs sluggish growth as per the latest CSO report of Index of Industrial Production (IIP). IIP is a composite indicator to understand and measure the growth rate of various industry groups in an economy like mining, manufacturing and electricity sectors and also steel, refinery products, crude oil, coal, cement, natural gas and fertilisers.
The manufacturing sector has the poorest performance that recorded a fall to 0.4% against a growth of 10.4% a year ago. And it is a big sector that constitutes 77.63%.
The poor show of manufacturing sector of consumer and capital goods caused drop in Industrial output growth to a 17-month low of 0.5% in November, 2018.
Capital goods output declined by 3.4%, compared to 3.7% growth a year ago.
Consumer durables output also dipped by 0.9%, against a growth of 3.1% a year earlier.
Consumer non-durable goods also saw a steep fall of 0.6%, compared to 23.7% growth a year ago.
The previous low was in June 2017, when IIP (Index of Industrial Production) growth contracted by 0.3%.
The mining sector posted 2.7% growth in the month, against 1.4%. The power sector output also grew by 5.1% from 3.9% a year ago.
What seems to be the cause of poor industrial growth?
While some, especially those supporting the economic policies of government, see it as a temporary or “technical” issue whose effects will soon wane, others view this as a more serious crisis created by a barrage of supply-side shocks to the economy; a stressed banking sector, demonetisation and GST implementation as well as disruptions in the agrarian sector that have all contributed in strong measure to the ongoing economic slide. With reference to the latter, I identify two standpoints; first, that while the longer-term story of structural reforms remains intact, there is a need for immediate stabilisation policy – fiscal and/or monetary policy – so that the short-term shock does not pull the economy into a deflationary spiral and second, that these shocks have impacted agriculture and industry so severely, especially the informal sector, that the crisis is now a deep structural issue rather than merely a short-run one. In this case, India’s growth story has been derailed and the pain must be endured by the masses for a long while to come. The blame for ending up in this mess rests on the government because of its poor understanding of economic realities and adventurism in policymaking and implementation.
The poor show of manufacturing sector of consumer and capital goods caused drop in Industrial output growth to a 17-month low of 0.5% in November, 2018.
Capital goods output declined by 3.4%, compared to 3.7% growth a year ago.
Consumer durables output also dipped by 0.9%, against a growth of 3.1% a year earlier.
Consumer non-durable goods also saw a steep fall of 0.6%, compared to 23.7% growth a year ago.
The previous low was in June 2017, when IIP (Index of Industrial Production) growth contracted by 0.3%.
The mining sector posted 2.7% growth in the month, against 1.4%. The power sector output also grew by 5.1% from 3.9% a year ago.
What seems to be the cause of poor industrial growth?
While some, especially those supporting the economic policies of government, see it as a temporary or “technical” issue whose effects will soon wane, others view this as a more serious crisis created by a barrage of supply-side shocks to the economy; a stressed banking sector, demonetisation and GST implementation as well as disruptions in the agrarian sector that have all contributed in strong measure to the ongoing economic slide. With reference to the latter, I identify two standpoints; first, that while the longer-term story of structural reforms remains intact, there is a need for immediate stabilisation policy – fiscal and/or monetary policy – so that the short-term shock does not pull the economy into a deflationary spiral and second, that these shocks have impacted agriculture and industry so severely, especially the informal sector, that the crisis is now a deep structural issue rather than merely a short-run one. In this case, India’s growth story has been derailed and the pain must be endured by the masses for a long while to come. The blame for ending up in this mess rests on the government because of its poor understanding of economic realities and adventurism in policymaking and implementation.
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