Signalling a deep slowdown in the economy, factory production registered a 1.1 per cent decline in August. The previous low in IIP was -1.7 per cent, in November 2012.

The negative growth number may prompt yet another policy rate cut in December, when the Monetary Policy Committee meets next. So far this year, it has lowered the policy rate (or the repo rate, at which the RBI lends to commercial banks) by 135 basis points. The government may also unleash more fiscal stimulus measures to boost both consumption and investment.

According to data from the Ministry of Statistics and Program Implementation (MOSPI), industrial growth, as indicated by the Index of Industrial Production (IIP), contracted by 1.1 per cent in August, against 4.6 per cent growth in July and 4.8 per cent growth in August 2018. This is the lowest in the past 81 months. Mining registered a mildly positive number (0.1 per cent growth), but the manufacturing growth rate was negative (-1.2 per cent).

Among user-based industry groups, only primary goods (1.1 per cent), intermediate goods (7 per cent) and consumer non-durable (4.1 per cent) posted positive growth; the other three sectors contracted — capital goods (-21 per cent), infrastructure/construction goods (-4.5 per cent) and consumer durables (-9.1 per cent). As many as 15 of the 23 groups contracted. It appears that the customary pre-stocking for festival demand in September and October did not take place this year. Food products, apparels, wood products and basic metals showed some growth.

Devendra Kumar Pant, Chief Economist with India Ratings, said the IIP number has been very volatile and the mild momentum of the past couple of months will fizzle out soon. Going forward, the IIP is likely to show an erratic low-growth trend, he added. 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, he added.