Published: Sat, May 12, 2018
Markets | By Otis Pena

Industrial production slows to a five month low of 4.4% in March

Industrial production slows to a five month low of 4.4% in March

This is the slowest industrial output has grown in the past five months.

Economists surveyed by Reuters had forecast 5.9 percent increase in output in comparison to a downwardly revised 7 percent cent year-over-year rise in February.

The Index of Industrial Production (IIP) for the mining, manufacturing and electricity sectors for the month of March 2018 stood at 131.3, 138.6 and 156.7 respectively, with the corresponding growth rates of 2.8 per cent, 4.4 per cent and 5.9 per cent as compared to March 2017.

As per data released by the Ministry of Statistics and Programme Implementation, the general index for the month of March stood at 139.0, which is 4.4 per cent higher compared to March a year ago.

The sharp decline has come at the when the GST collection in April crossed the mark of Rs 1 lakh crore mark for the first time, suggesting that GST regime has stabilised after recording low collection in the first few months of implementation.

Manufacturing grew at 4.4% against 8.7% in February.

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Madan Sabnavis, Chief Economist, CARE Ratings said that IIP growth for March at 4.4% is exactly "as per our estimates for the month".

The mining sector growth decelerated to 2.8 per cent during the month from 10.1 per cent in March 2017. "With an unfavourable base effect, the capital goods sector displayed a YoY contraction of 1.8 per cent in March 2018, the worst performance in nine months, despite the healthy growth displayed by commercial vehicles". Consumer durables output, however, rose by 2.9 per cent as against a contraction of 0.6 per cent in March 2017. The cumulative growth in these three sectors during April-March 2017-18 over the corresponding period of 2016-17 has been 2.3 percent, 4.5 percent and 5.4 percent respectively.

The industry group "other manufacturing" recorded the highest negative growth of -30.7% followed by -20.6% in "manufacture of tobacco products".

"Going forward, Pant believes that output growth in 2018-19 is likely to be better than the last financial year, due to expectation of a normal monsoon, robust vehicle sales, focus on infrastructure and sector specific government schemes such as such as Housing for All".

Capital goods output, however, declined by 1.8 per cent during March as compared to a growth of 9.4 per cent in the corresponding period past year. Among used-based classification while growth slowdown was across the board, capital goods output contracted in March 2018. "Faster resolution of stresses assets of banking sector and limiting fiscal slippage will be key factors to watch", he added.

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