IIP inches up 0.1% in July

Manufacturing rebound unlikely; capital goods output down 5%

Two consecutive contractions in the highly-weighted manufacturing output, pulled India’s industrial production to 0.1 per cent in July from a year earlier, prompting a worried government to call a high-level meeting of central ministries and state government officials on Thursday to chalk out plans to cure the sector.

Manufacturing, which contracted an annual 0.2 per cent in July, constitutes about 76 per cent of industrial production.

Analysts said a rebound in manufacturing was unlikely if the government did not take measures to address structural deficiencies. Political gridlock, poor domestic demand and slowing exports have affected India’s industrial production in the past as many months.

In Thursday’s meeting, Commerce and Industry Minister Anand Sharma is expected to discuss measures to propel growth in the manufacturing sector with officials. Problems regarding land acquisition, forest clearance and other issues are also expected to be discussed in the wake of slowing investment and subdued production activity.

Production of capital goods also declined by 5 per cent in July as against a contraction of 13.7 per cent in the same month a year ago. Mining output in July dipped by 0.7 per cent as against a growth of 0.7 per cent in the same month a year ago. Although July IIP data was slightly better than last month’s contraction of 1.8 per cent, it was mainly because of a favourable base effect.

Economists apprehended that a drag in mining sector would also impact on electricity generation. Power generation, which was holding up well all through last year has gone down, data released in the past successive months showed.

Of particular concern is poor performance on the consumer durable output front despite the festive season ahead, indicating that consumption in India is being hit with clear signs of a demand compression. Consumer durables output grew 0.1 per cent compared to 4.1 per cent a year ago.

CII said the economy is in need of sentiment boosters. Investments have dried up and it is imperative that non-legislative policy measures are announced, which could help improve confidence levels.