After 3 months of decline, industrial output looks up

After three consecutive months of decline, industrial production returned to a positive territory and grew by 1.8% in November.

A 2.7% growth in manufacturing sector helped the index look up but experts warned it was too early to say that manufacturing had turned the corner, as the expansion came on an extremely low base of last year.

In November 2018, factory output had grown by a mere 0.2%. Manufacturing sector had contracted by 0.7% last year in the same month.

The growth in the manufacturing Purchasing Managers’ Index in November had given an indication of a better factory output number. After falling to a two-year low of 50.6 in October, the manufacturing PMI rose to 51.2 in November.

“For the first time in the last four months, Nov IIP growth rate has increased to 1.8% from -3.8% in October as production activity in cement and fertilisers has picked up. Due to slowdown, India’s IIP has been contracting since August 2019. However, a favourable base effect and improvement in PMI numbers has led to an expansion,” Rahul Gupta of Emkay Global Financial Services said.

But other sectors continued to paint a grim picture. Electricity generation declined by 5% as against a growth of 5.1% in November 2018.

Mining output, too, decelerated to 1.7% from a 2.7% growth in the corresponding period last year. The industrial production growth during April-November period was at 0.6% compared to 5% in the same period in 2018-19.

The numbers came a day after Prime Minister Narendra Modi exuded confidence about the fundamentals of India’s economy remaining strong, and that his $5 trillion dream was a realistic one.

The data released by the Central Statistics Office (CSO) earlier this week painted a grim picture about the growth of manufacturing sector in the current financial year ending March 31. It estimated manufacturing sector to grow at a two-decade low of 2% in 2019-20. The country’s stuttering automobile industry, too, does not point towards any short-term revival of manufacturing.

The automotive industry accounts for almost half of the country’s manufacturing GDP.