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May 11, 2018

IIP takes a break

IIP growth slowed down on year end


Growth in the index of industrial production (IIP) slowed to 4.4% on-year in March 2018, after having grown over 7% plus average, in the previous four months. Core sectors have been consistently losing steam. Growth in the economy's eight core sectors, which make up about 40% of total industrial production, slowed to 4.1% in March, from 5.3% in February and 6.1% in January. Growth in the non-core sectors too slipped during the month. Separately, trade data reported a slowdown in non-oil exports in March. That said, an unfavorable base effect was also behind the slowdown in IIP growth in March. Overall, IIP growth for fiscal 2018 as a whole was stagnant at 4.4% (same as in fiscal 2017). While manufacturing sector displayed some improvement (growing by 4.4% over 3.3% in fiscal 2017), the overall stagnancy was on account of a subdued performance of the electricity and mining sectors.


Data readings


  • Industrial activity lost some steam, after having turned in a steady performance in past few months. IIP growth was down to 4.4% in March, form an average 7.6% in the previous four months – the best performance phase of IIP in last fiscal. The slowdown in IIP was in tandem with a slower manufacturing (the largest contributor to IIP with 77.6% weight) sector growth, which fell sharply to 4.4%, from 8.5% in February. On the contrary, mining and electricity sectors – which had been slowing down in previous months – displayed an improvement, growing by 2.8% and 5.9% respectively.
  • Within manufacturing, only 11 out of 23 industry groups showed positive growth on an annual basis. Sectors which displayed high positive growth were, ‘furniture’, growing by 41.5%, followed by ‘food products’, which was up 20.6%, and ‘motor vehicles, trailers and semi-trailers’, which clocked a growth rate of 17.2%. Sectors that displayed high negative growth were, ‘other manufacturing’ (-30.7%), followed by ‘tobacco products’ (-20.6%) and ‘wearing apparel’ (-18.6%). From the end-use perspective, growth in both the industrial and investment-oriented manufacturing sectors and the consumer-oriented sectors (accounting for 37% of the manufacturing sector IIP) slowed down. While the former saw growth declining to 1.6% from 4.5%, in the latter slowed to 2.0% from 2.5%.
  • According to the use-based classification, capital goods sector was once again in red, growing by -1.8%. Infrastructure and construction goods sector displayed the highest growth (8.8%) amongst all user categories, but was lower than previous month’s 12.6%. The only segment which saw its growth improving in March was consumer non-durable goods (10.9% from 7.3%).