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Factory output: IIP sees steepest fall in 8 years

Economists blamed low demand for the shrinking industrial numbers. “Demand side weakness hit the informal sector some time back.

Published: 12th November 2019 08:49 AM  |   Last Updated: 12th November 2019 08:50 AM   |  A+A-

Employees work at the assembly line inside TMB's mobile phone battery manufacturing plant in Noida, India. (Photo: Reuters)

By Express News Service

NEW DELHI: India’s factory output as measured by the Index of Industrial Production (IIP) contracted 4.3% in September — the worst since October 2011 — compared with 4.6% expansion in September 2018, dragged by a recession-hit manufacturing sector.

Economists blamed low demand for the shrinking industrial numbers. “Demand-side weakness hit the informal sector some time back. Now it is spreading to the organised corporate sector. IIP reflects the organised sector’s growth,” said Dr Pronab Sen, former chairman of the National Statistical Commission.
According to Devendra Kumar Pant, chief economist and senior director at India Ratings & Research, economy is facing a structural growth slowdown originating from declining household savings and low agricultural growth, which is feeding into low wage growth in rural areas.

Despite a series of recent policy reform measures, which included a cut in corporate taxes and sector-specific packages for automobiles and realty, experts don’t see a major turnaround in the next few months.
According to Pant, IIP growth in October 2019 is also likely to be in the negative territory.
Dr Sen said, “We need to look at rural and unorganized sector growth stimulants which would result in increase in employment and demand.”



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