March IIP growth skids to 4.4 per cent

Factory output grew 4.4 per cent in March 2018, much lower than the 7.1 per cent print recorded in previous month.

This is the first time in four months that the Index of Industrial Production (IIP) recorded less than 7 per cent.

IIP recorded 4.4 per cent growth in March last year.

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.

Manufacturing sector, which has weightage of 77 per cent in the index, saw sharp slowdown in March 2018 at 4.4 per cent as compared to 8.7 per cent in same month last year. In March last year, manufacturing growth came in at 3.3 per cent. On the other hand, mining recorded sharp fall in growth at 2.8 per cent as compared to 10.1 per cent growth in same month last year. Mining had contracted 0.3 percent in February 2018.

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

EXPERTS' TAKE

Devendra Kumar Pant, Chief Economist and Senior Director (Head-Public Finance), India Ratings  said that though March 2018 IIP growth at 4.4% came in same as March 2017 growth, it declined sequentially from high growth during November 2017-February 2018.  While mining and electricity output grew faster in March 2018 from February 2017, manufacturing output growth slowed down.

One of the major reasons from slower output growth was unfavourable base effect of March 2017."Among used-based classification while growth slowdown was across the board, capital goods output contracted in March 2018. Going forward, while output growth in FY19 is likely to be better than FY18 due to expectation of a normal monsoon, robust vehicle sales, infrastructure focus and sector specific programmes such as housing for all. Faster resolution of stresses assets of banking sector and limiting fiscal slippage will be key factors to watch", Pant said.

Aditi Nayar, Principal Economist and Vice President, ICRA said that the extent to which IIP growth faded in March 2018 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% growth in March 2018, she said.. 

The decline in the IIP growth in March 2018 relative to February 2018 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% in the IIP, recorded a YoY contraction in March 2018, she said. 

With an unfavourable base effect, the capital goods sector displayed a YoY contraction of 1.8% in March 2018, 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.

Madan Sabnavis, Chief Economist, CARE Ratings said that IIP growth for March at 4.4% 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% is indicative of stability in this sector, with the acceleration phase still some time away, Sabnavis said.

Srivats.kr@thehindu.co.in

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