NEW DELHI: India’s industrial growth fell sharply in July after rising for two months, with data suggesting that the monsoon has not revived rural demand and investments are yet to pick up.
Growth as measured by the Index of Industrial Production (IIP) contracted 2.4% in July, led by a 3.4% fall in manufacturing and a 0.8% rise and 1.6% gain in mining output and power generation, respectively, according to data released by Central Statistics Office.
“There is no pickup in private investment because industries are sitting on excess capacity, high leverage and are faced with weak global demand,” said Crisil chief economist DK Joshi.
Car sales and the manufacturing purchasing managers’ index in August were strong, suggesting a further recovery in urban consumption-led demand. As in the previous months, one item – ‘cable, rubber insulated’ – contributed to a 29.6% fall in capital goods output and hindered overall growth. Industrial growth would have been positive and better if the -4.24% contribution of ‘cable, rubber insulated’ was excluded.
“A single item is dragging the index and thus 2.4% decline paints an exaggerated picture. Plus, there were five Sundays in July,” noted Yes Bank’s chief economist Shubhada Rao.
Joshi questioned the IIP numbers, saying it is a defunct indicator that only makes noise and doesn’t give any signal. The IIP reading for June was revised to a 1.9% increase, compared with a 2.1% rise earlier. For the first four months of 2016-17, the IIP declined 0.2%.