August factory output at 81-month low, manufacturing shrinks
Contraction in manufacturing activity decelerated India's factory output growth to (-)1.1 per cent in August 2019 from a rise of 4.6 per cent reported in July, official data showed here on Friday.
 
The growth has hit the lowest level in the last 81 months. 
 
The growth rate of August factory output was lower than the 4.8 per cent achieved during the corresponding month of the previous fiscal.
 
"The Quick Estimates of Index of Industrial Production (IIP) with base 2011-12 for the month of August 2019 stands at 126.6, which is 1.1 per cent lower as compared to the level in the month of August 2018," the Ministry of Statistics and Programme Implementation said. 
 
"The cumulative growth for the April-August period over the corresponding period of the previous year stands at 2.4 per cent," it added.
 
As per the data, the output rate of the manufacturing sector fell (-)1.2 per cent in August from a year-on-year (YoY) rise of 5.2 per cent.
 
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.
 
Among the six use-based classification groups, the output of primary goods, which has the highest weightage of 34.04, grew by 1.1 per cent. The output of intermediate goods, which has the second highest weightage, increased by 7 per cent.
 
The output of consumer non-durables was up by 4.1 per cent, whereas that of consumer durables fell by (-)9.1 per cent.
 
In addition, output of infrastructure or construction goods decreased by (-)4.5 per cent and that of capital goods fell by (-)21 per cent.
 
In terms of industries, 15 out of the 23 industry groups in the manufacturing sector have shown negative growth during the month under review as compared to the corresponding month of the previous year.
 
"The industry group 'manufacture of motor vehicles, trailers and semi-trailers' has shown the highest negative growth of (-)23.1 per cent, followed by (-)21.7 per cent in 'manufacture of machinery and equipment n.e.c.' and (-)18 per cent in 'other manufacturing'," the ministry said.
 
"On the other hand, the industry group 'manufacture of basic metals' has shown the highest positive growth of 11.8 per cent, followed by 11.3 per cent in 'manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials' and 10.3 per cent in 'manufacture of wearing apparel'," it said.
 
According to Devendra Kumar Pant, Chief Economist at India Ratings & Research: "IIP growth has been the lowest in the last 81 months and saw the first contraction after June 2017. It appears that pre-stocking due to festive demand in September and October has not taken place." 
 
"Going forward, the IIP is likely to show erratic low growth trend. 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 is going to return back soon," Pant said.
 
ICRA's Principal Economist Aditi Nayar said: "With the worsening in the performance of Coal India Limited and electricity generation, and the continuing deep contraction in auto production in September 2019, it appears unlikely that the YoY decline in the IIP in August 2019 will be reversed in the just concluded month." 
 
"There is a growing likelihood that the GDP growth may not meaningfully accelerate in Q2 FY2020 from the multi-quarter low of 5 per cent recorded in Q1 FY2020, despite a favourable base effect. The extent of pickup in consumption in the festive months and crop production in the rabi season will signal whether a material turnaround in demand and economic growth are in the offing."
 
Emkay Wealth Management's Research Head Joseph Thomas said: "If we look at the sub classification one can see that the shrinkage in output has come from a dismal performance in manufacturing, substantial fall in capital goods, consumer durables and infra. This amply reflects the underlying weakness in manufacturing and industrial activity which needs to be addressed without much loss of time for economic recovery."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article
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    Sale-bound Air India subsidiary gets nod for foreign flights
    The Civil Aviation Ministry has approved Alliance Air plan to launch foreign operations by starting flights to Sri Lanka even as the airline's parent Air India remains on top of the government's disinvestment agenda.
     
    The move has triggered speculation among Air India employees that government may continue in airline business by not selling Alliance Air. This runs counter to the government's often repeated argument that "government has no business to be in airline business."
     
    "The move suggests government would not sell Alliance Air and continue in airline business. Alliance Air could be an "Indian Airlines" in the making. We are unable to understand then why Air India is being sold," said an executive.
     
    "Perhaps, it wants to keep an airline to serve political interests. Anyways, so many flights have been started after General Elections on recommendations of legislators," he added.
     
    The permission for inaugural overseas flight has come even as Alliance Air's financial health remains precarious. The carrier reported a net loss of Rs 263.76 crore in 2017-18 as against the net loss of Rs 286.70 crore in the previous financial year.
     
    The airline mostly connects tier-II and tier-III towns which are considered important for social and political reasons than commercial. Making most of the regional connectivity scheme launched by the government, it has bagged rights to operate various Udan flights.
     
    As per Air India official website, Alliance Air operates air services to 52 destinations with a fleet of 18 ATR 72-600 (70/72 Seater) and 1 ATR 42-320 (48 Seater) aircraft. It has 800 flight departures per week and 114 flight departures per day.
     
    Official sources told IANS that government has allowed Alliance Air to operate 7 flights a week from Chennai to Palaly and Batticaloa in Sri Lanka with its ATR 72-600 airplanes.
     
    The government has decided to sell Air India lock, stock and barrel and a ministerial panel headed by Home Minister Amit Shah is set to finalise the terms of bidding it out. The express of interest (EoI) could be invited by the end of October.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Vehicles sales plummet for the 11th month in a row
    Despite a 135 basis point rate cut since February and a number of measures announced by the central government including the corporate tax cut, vehicle sales plummeted for the 11th straight month.
     
    Society of Automobile Sales (SIAM) data released on Friday showed that commercial vehicle sales -- a proxy for the commercial health of the economy -- steeply fell by of 39 per cent to 58,419 units.
     
    Signs that the customers are still away from showrooms was visible in passenger vehicles sales data which witnessed a decline of 23.69 per cent to 223,317 units this September.
     
    Passenger cars sales witnessed a decline of 33.4 per cent to 131,281 units. In August, its sales were down 41 per cent.
     
    Overall domestic automobile sales fell 22.41 per cent in September 2019.ATwo wheeler sales - often tracked to analyse the rural markets health - was also down 22.09 per cent.
     
    Several auto markers are forced to announce production cuts and slash workforce inorder to cut losses.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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