Factory output grew 4.4 per cent in March, much lower than the revised 7 per cent print recorded in the previous month.

This is the first time in five months that the Index of Industrial Production (IIP) recorded print of less than 7 per cent, said economy watchers. IIP had recorded 4.4 per cent growth in March last year.

Meanwhile, the IIP for December 2017 and February 2018 has been revised to 7.3 per cent (final) and 7 per cent (first revision)

For April-March 2018, the IIP recorded 4.3 per cent, lower than 4.6 per cent in the same period of previous year, official data released on Friday showed.

 

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Manufacturing sector, which has weightage of 77 per cent in the index, saw sharp slowdown in March at 4.4 per cent compared to 8.7 per cent in the previous month. In March last year, manufacturing growth came in at 3.3 per cent.

Mining recorded growth of 2.8 per cent compared to contraction of 0.3 per cent in the previous month. Mining had recorded 10.1 per cent growth in March last year.

Electricity sector recorded 5.9 per cent growth in March compared to 6.2 per cent in the same month last year. In February 2018, electricity sector grew 4.5 per cent.

Experts’ view

Devendra Kumar Pant, Chief Economist and Senior Director (Head-Public Finance), India Ratings, said March IIP growth at 4.4 per cent, although same as March 2017, declined sequentially from high growth during November 2017-February 2018.

While mining and electricity output grew faster in March 2018 from February 2018, manufacturing output growth slowed down.

One of the major reasons for slower output growth was unfavourable base effect of March 2017, Pant said.

Madan Sabnavis, Chief Economist, CARE Ratings, said IIP growth for March is exactly “as per our estimates for the month”. An interesting takeaway is that the monthly pattern is broadly reflective of the full-year production. The monthly growth number continues to be volatile with the March number being depressed by a high base as well as lower core sector growth. But still the growth of 4.4 per cent is indicative of stability in this sector, with the acceleration phase still some time away, Sabnavis said.

Aditi Nayar, Principal Economist and Vice-President, ICRA, said the extent to which IIP growth faded in March was sharper-than-expected, driven by the deteriorating performance of capital goods, as well as modest sequential dips in the growth of the other categories except consumer non-durables. Barring the healthy expansion of consumer durables and construction goods, that were respectively driven by items such as sugar and cement, the other use-based categories recorded a sub-3 pre cent growth in March 2018, she said..

The decline in the IIP growth in March relative to February was led by manufacturing, even as mining and electricity recorded modest improvements, driven by coal and thermal generation, respectively. As many as 12 of the sub-sectors of manufacturing, with a weight of 30.6 per cent in the IIP, recorded a y-o-y contraction in March 2018, she said.

With an unfavourable base effect, the capital goods sector displayed a y-o-y contraction of 1.8 per cent, the worst performance in nine months, despite the healthy growth displayed by commercial vehicles. Nevertheless, the sustained contraction recorded from April 2017 to July 2017, suggests that capital goods may revert to displaying modest growth in the next few months, she added.

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