Data released by the National Statistical Office (NSO) on Friday showed the index of industrial production fell an annual 1.1% in August, compared with growth of 4.6% in the previous month and 4.8% in the year-earlier month.
"The Indian economy is presently facing a structural growth slowdown originating from declining household savings rate, and low food inflation and agricultural growth".
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 past year. It was the worst performance since a 1.7 percent contraction in November 2012. A slide in the output of infrastructure goods and consumer durables offers pointers to the underlying weak demand conditions.
On a YoY basis, mining production inched up by just 0.1 per cent from a negative growth of (-) 0.6 per cent and the sub-index of electricity generation was lower by (-) 0.9 per cent from 7.6 per cent. Mining sector did not show any changes with a growth rate of 0.1 per cent in August.
According to the data, among used-based industry groups, only primary goods (1.1%), intermediate goods (7%) and consumer non-durable (4.1%) recorded positive growth and the other three sectors contracted - capital goods (-21%), infrastructure/construction goods (-4.5%) and consumer durables (-9.1%). "The cumulative growth for the period April-August 2019 over the corresponding period of the previous year stands at 2.4 percent", the release from the ministry said. It showed a decline of 4.5 percent in August 2019 as against a growth of 8 percent in the corresponding month of previous year. They also said the dismal factory data may prompt the RBI to go for another interest rate cut when it reviews monetary policy in December. Realizing that the economic downturn is sharper than it earlier anticipated, it pared down its full year growth forecast to 6.1% in 2019-20 from 6.9% projected earlier. Collections from India's nationwide goods and services tax (GST) fell to a 19-month low in September, while direct tax collection growth since the beginning of the current fiscal stands at 6 percent so far, below the required growth rate of 17 percent. The policy measures announced by the government after the first quarter GDP growth of 5 per cent are more supply side interventions and are unlikely to boost demand. With no fiscal space available to the government, it is unlikely that the demand in going to return back soon.
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