Official data released on Friday showed the index of industrial production (IIP) grew 1.8% in November, higher than the downwardly revised contraction of 4% and above the 0.2% posted in November 2018. Between April and November, industrial output growth rose a paltry 0.6% compared to 5% in the year-earlier period.
Manufacturing sector grew an annual 2.7% in November compared with the 0.7% contraction in November 2018, while mining rose 1.7% compared to a 2.7% expansion in year-ago period. Economists attributed the growth in manufacturing to the favourable base effect rather than revival in demand in the economy. The electricity sector contracted for the fourth consecutive month, declining 5% during the month compared to a growth of 5.1% in the year-earlier period.
The consumer goods sector, a key barometer of investment activity, contracted for the 11th consecutive month by 8.6% in November compared with a decline of 4.1% in the year-ago month. Consumer durables declined for the sixth successive month in November by 1.5% compared to a contraction of 3% in the year-earlier period.
Some economists said they expect a contraction in overall numbers as the base effect fades. “Looking ahead, the available data suggests that the growth of mining output would strengthen in December 2019, while the pace of contraction of electricity generation would narrow,
thereby supporting the overall performance of the IIP. However, waning of the favourable base effect could result in manufacturing, as well as the overall IIP, reverting to a disappointing contraction in December 2019,” said Aditi Nayar, principal economist at ratings agency ICRA.
The industrial sector has been sluggish for a sustained period as demand conditions have remained tepid and a sharp slowdown has gripped the economy. The government has forecast the economy to grow 5% in 2019-20, the slowest pace in 11 years.
Now, all eyes are on the Union Budget to be unveiled on February 1 for measures to boost the economy. The government and the RBI have taken steps to revive growth and experts expect a revival in the coming months. “We are expecting some revival in the coming months along with a favourable base for the rest of the months. On this premise, we are expecting the industrial output to grow around 4% by March 2020,” said Madan Sabnavis, chief economist at CARE ratings.