Industrial output contracts for 1st time in nearly 2 years

NEW DELHI: The country’s industrial output contracted for the first time in 22 months in Aug, dragged down by the high base effect and decline in mining and electricity and a weak manufacturing sector.
Data released by the National Statistics Office (NSO) on Friday showed the index of industrial production (IIP) contracted 0.1% in Aug compared to a 4.7% expansion in July and 10.9% growth in Aug last year.

The manufacturing sector, which accounts for a bulk of the index, grew an anaemic 1% compared to a 10% expansion in Aug last year. The mining sector fell 4.3% during the month compared with a 12.3% growth in the year earlier period, while the electricity segment contracted 3.7% in Aug compared with an expansion of 15.3% in Aug last year.
The core sector, which accounts for nearly 40% of the IIP, had contracted by 1.8% in Aug as the sector had been hurt by monsoon rains.
Experts said the Aug data should not ring any alarm bells as there has been a temporary halt to the demand in key sectors and pointed to monsoon rains which had hurt expansion.
“While unpalatable, the marginal contraction of 0.1% displayed by the IIP in Aug is not alarming, as it largely reflects the temporary dousing of mining output, electricity demand and retail footfalls by the heavier than normal rains, as well as an unfavourable base,” said Aditi Nayar, chief economist at ratings agency ICRA.
“Nevertheless, in disaggregated terms, all the use-based categories reported a deterioration in Aug 2024 relative to the previous month,” said Nayar.