Factory output recovers in November, expands by 1.8%
After contracting for three straight months, the Index of Industrial Production (IIP), a measure of factory output, grew at 1.8% in November 2019, according to data released by the ministry of statistics and programme implementation (MoSPI).
The number underlines the signs of some sort of recovery in industrial activity, which can be seen from the rise in Purchasing Managers’ Index (PMI) for manufacturing in the months of November and December.
To be sure, industry growth for the current fiscal year is likely to be much less than what it has been earlier. The cumulative annual growth in IIP from April to November 2019 is just 0.7%, the lowest since 2012. In the first advanced estimates for fiscal year 2019-20, the Central Statistical Office (CSO) projected industry and manufacturing growth in FY20 to be 2.5% and 2%, respectively.
A usage-wise break up of the IIP shows that the growth was driven by intermediate goods and consumer goods while primary goods, infrastructure goods and capital goods continued to contract in November.
Even in the consumer goods category, it is consumer non-durables which have shown a revival, while the durable category continues to contract.
Data released by the Society for Indian Automobile Manufacturers (Siam) shows that domestic car sales contracted for the eighteenth consecutive month in December 2018, which suggests that non-durable consumer demand is still not showing signs of revival.
“The latest IIP numbers came as a relief to the market and policymakers as this is the second consecutive month when the activity in the industry sector showed some traction,” said Rumki Majumdar, economist, Deloitte India.
“On a month on month basis, growth has been broad-based with capital and durable goods showing considerable improvement. Relative to the previous year, growth in manufacturing has been impressive, although it could not build on the past month’s growth momentum. Intermediate goods, which have a weight of over 17% in the index, rose noticeably indicating considerable strength in the production supply chain, but this growth is not yet translating to final production,” she added.