IIP Data: India’s Industrial Output Growth Falls To 2% In June Amid A Weak Economy

Growth in India’s industrial output continued to moderate led by weakness in the manufacturing and mining segments.

The Index of Industrial Production rose by 2 percent in June 2019 over last year, compared to an increase of 3.1 percent in May. While IIP growth fell, it came in slightly ahead of expectations. Twenty nine economists polled by Bloomberg had forecast June IIP growth at 1.4 percent.

On a cumulative basis, industrial output rose by 3.6 percent in the first quarter of FY20 as against an increase of 5.1 percent in the same quarter last year.

Sectoral Estimates

Among the three key sectors, manufacturing and mining saw weaker growth, although growth in electricity generation in June was stronger than in May. Fifteen of 23 manufacturing industry groups saw a contraction in output in June, while 11 of them saw a contraction in output for the full quarter.

• Manufacturing output growth stood at 1.2 percent in June compared to 2.5 percent in May.
• Mining output was at 1.6 percent in June as against 3.2 percent last month.
• Electricity generation rose by 8.2 percent from 7.4 percent in May.
  

Industrial output, as classified by the end-use of goods, indicated a contraction in capital goods and consumer durables. Growth in consumer non-durables output was steady with 7.8 percent growth compared to a year ago.

• Capital goods output contracted by 6.5 percent in June against a 0.8 percent growth in the previous month.
• Intermediate goods output growth grew by 12.4 percent compared with 0.6 percent in the previous month.
• Primary goods output growth fell to 0.5 percent in June compared with 2.5 percent in May.
• Infrastructure and construction goods output contracted by 1.8 percent compared with a 5.5 percent rise in May.
• Consumer durables output shrank by 5.5 percent as against a contraction of 0.01 percent in May.

Although the sequential dip in industrial growth is partly on account of the base effect, the anemic June 2019 IIP print as well as the year-on-year contraction in 15 of the 23 sub-sectors of manufacturing, reinforce the evidence of a slowdown emerging from various sectors, said Aditi Nayar, principal economist at ICRA.