Factory output declines 1.1% in August as manufacturing slumps — Slowdown Blues

Factory output declines 1.1% in August as manufacturing slumps — Slowdown Blues

"Fifteen out of 23 industry groups in the manufacturing sector have shown negative growth during the month of August 2019 as compared to the corresponding month of the previous year", Ministry of Statistics & Programme Implementation said in a press release.

"The cumulative growth for the period April-August 2019 over the corresponding period of the previous year stands at 2.4 per cent", it added.

Production of consumer durables shrank 9.1%, while that of capital goods fell by 21%.

Data released earlier this month by the industry department showed India's eight infrastructure sectors constituting about 40% of IIP contracted for the first time in more than four years in August by 0.5%. The mining sector showed a growth of 0.1%.

As per the government data, manufacturing sector reported a 1.2 per cent decline in output during August, as opposed to a growth of 5.2 per cent in the corresponding month a year ago.

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The production of Primary goods grew 1.1%, while capital goods fell by 21%. The index had grown 4.6% in July, and 4.8% in August 2018. Exports contracted 1.7 percent during the same period. This was the first contraction in the sector in the past six months.

India's infrastructure output fell in August from a year earlier, the first contraction since April 2015, signalling the recovery in Asia's third-largest economy may be slow despite a cut in the corporate tax rate and other policy measures created to spur investment.

The national income data have reinforced signs that were emanating from a slew of shop-end data, such as vehicle and consumer goods sales, often seen as proxy indicators to gauge trends in household spending. "With no fiscal space available to the government, it is unlikely that the demand is going to return back soon", Pant said.

To combat the slowdown, Finance Minister Nirmala Sitharaman announced a cut in corporate tax rates in September, bringing it down to 22 percent from 30 percent for existing companies, and to 15 percent from 25 percent for new manufacturing companies. "Low agricultural growth is feeding into low agricultural and non-agricultural wage growth in rural areas, which is impacting rural demand adversely", Pant said. So far this year, it has lowered the policy rate (or the repo rate, at which the RBI lends to commercial banks) by 135 basis points.

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