IIP in positive zone after 3 months, grows 1.8% in November

The numbers signal that the economy is turning a corner after being in the grips of falling sentiment as all critical macroeconomic indicators showed weakness. Core sector output contracted 1.5 per cent for November but showed marked improvement f...

Industrial production grows 1.8% in November after contracting for two successive months
NEW DELHI: India’s industrial production expanded at a modest pace in November, reversing three consecutive months of contraction, but many sectors remained in the red.

Industrial growth, as measured by the index of industrial production (IIP), rose 1.8% in November compared with a 3.9% contraction in October, data released on Friday by the statistics office showed, aided by a sharp growth in intermediate goods and a favourable base effect. IIP had risen 0.2% in November 2018.

The data is consistent with the slight pickup in the economy expected in the second half.


Official estimates released by the government earlier this week showed GDP is likely to grow 5% in FY20, the slowest pace in 11 years. Given that expansion was 4.8% in the first half, second-half growth should be 5.2%.

“Overall, IIP is providing early signals of bottoming out of growth slump,” said Yes Bank chief economist Shubhada Rao.

“This is also in sync with survey-based PMI indicators and our expectation of a mild recovery in the second half of FY20,” Rao said. Mining and manufacturing output rose 1.7% and 2.7%, respectively, in the month. However, electricity generation contracted 5% in November. April-November industrial growth at 0.6% was well below 5% for the same period in the last fiscal.
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13 out of 23 industry groups reported growth in the month.

“A lot of this growth is due to the base effect, which will continue to prop up these numbers in the coming months till March,” said CARE Ratings chief economist Madan Sabnavis, pegging overall industrial growth at about 4% by March 2020.

Society of Indian Automobile Manufacturers data released Friday showed total passenger car sales in the domestic market fell 8.4% in December. Sales of passenger vehicles, including passenger cars, utility vehicles and vans, declined 1.2%.

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ICRA principal economist Aditi Nayar said the extent to which revenue considerations necessitate a cut in government spending would be a key driver of growth in the March quarter. “Unless and until majority of the use-based sectors show positive growth on a sustained basis, it would be difficult to believe that the Indian industrial sector has come out of the woods,” said India Ratings principal economist Sunil Kumar Sinha.

Output contracted in four of the six sectors among use-based classifications. The intermediate goods sector grew by a sharp 17.1% while consumer nondurables, an indicator of rural demand, was up 2%.

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Production of capital goods, an indicator of investment activity, shrank 8.6%. Capital goods production has declined 11.6% on year in April-November.

Production of consumer durables, a reflection of urban demand, contracted 1.5% in November, highlighting the underlying weakness in consumer sentiment toward big-ticket items, while that of primary goods shrank 0.3%.
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