Contraction continues in India’s industrial output
While India's industrial output continues to fall and goes down by 3.8% in October, the pimple on this ulcer is retail inflation that has surged to 5.54% in the same month
December 12, 2019
There is something in the news today that will tell you how the government's efforts of reversing the economic slowdown are still away from showing results of revival. India's industrial output, that is measured in terms of Index of Industrial Production (IIP), has further shrunk by 3.8% in October after reducing to 4.3% in September and in far contrast to an 8.4% growth in September 2018. The growing pimple on this ulcer is retail inflation measured by the Consumer Price Index (CPI). In November, the retail inflation in the country has surged to because of the surging cost of food items.
While Food price inflation measured by the Consumer food price index (CFPI) rose to 10% in the same month.
Although the experts believe that the slight improvement in India's industrial output, after reducing to 4.3% in September it contracted by 3.8% in October, is an early positive sign for the economy, as Goods and Services Tax (GST) receipts also crossed 1 Lakh crore mark in November reversing a two-month contraction.
What caused a further contraction in India's industrial output?
Further contraction in the industrial output is mainly because of poor performance by power, mining and manufacturing sectors, according to official data released on Thursday. Power generation dipped by 12.2% in October, compared to 10.8% growth in the same period a year ago. Mining output fell by 8% in the same month as against 7.3% growth in the corresponding period last fiscal.
'Slowdown is cyclical, will improve'
On Monday this week, India's Chief Economic Advisor Dr Krishnamurthy Subramanian had said
that the current economic slowdown in the country is more cyclical than structural in nature and the government has a well-thought-out agenda for reforms. “Needless to say that there is an economic slowdown. But you estimate whether it is cyclical or structural by estimating the potential growth rate of the economy. If the growth potential has changed because of some structural aspects of the economy, then you can say that the slowdown is structural.” he said.