Industrial output keeps shrinking, inflation balloons

Analysts explained that consumer price index or the measure of retail inflation was up on the back of costlier food prices.

Published: 13th December 2019 08:47 AM  |   Last Updated: 13th December 2019 08:47 AM   |  A+A-

Express News Service

NEW DELHI: India’s economy continued to report deepening signs of a slowdown with October factory production figures contracting as much as 3.8%, dragged by manufacturing which shrank 2.1% as well as power and mining, which  declined even more.

Government data also showed retail inflation shot up to a 40-month high of 5.54% in November, inching closer towards the psychological mark of 6%.

Factory output, measured in terms of Index of Industrial Production, had expanded 8.4% in October last year. The latest numbers represent the third straight month of contraction in a row. IIP had fallen 4.3% in September and 1.4% in the previous month.

“The breakdown showed the slump in capital goods production worsened which suggests that investment growth remained weak at the start of Q4,” said Mark Williams, Chief Asia Economist for Capitaleconomics.

According to the data, capital goods output shrank by 22%, while the manufacturing sector declined 2.1% in October compared to 8.2% robust growth in the same period last year.

Electricity generation, similarly, slipped sharply by 12.2% in October, compared to 10.8% growth in the same period last year. Mining output, too, fell 8% in the month under review against 7.3% growth in the same period last fiscal.

It was obvious that demand slowdown was hitting factory output, with consumer durables contracting by 18% and consumer non-durables shrinking by 1.1%. Analysts said that consumers reduced purchases of big-ticket durables like TV and automobiles in times of economic stress and this was reflected in the production pattern.

Analysts explained that consumer price index or the measure of retail inflation was up on the back of costlier food prices.

However, Deepthi Mary Mathew, economist at Geojit Financial Services, said, “The worrying fact is the low core inflation rate that is not showing any signs of improvement at 3.5%. It reflects the tepid demand in the economy.”


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