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Industrial growth falls to 17-month low of 0.5 per cent in Nov

New Delhi: A slump in India’s manufacturing sector led to the industrial growth fall to a 17-month low of 0.5 per cent in November, data released by the Central Statistics Office (CSO) showed.

With the Lok Sabha polls expected to be held around late April or early May, the low industrial growth will be a fresh headache for the current government.

Earlier this week, a CSO forecast had shown that the GDP will grow slower at 6.8 per cent in the second half of 2018-19 (period between October 1, 2018 to March 31, 2019) against 7.6 per cent in the first half of the financial year.

The Index of Industrial Production (IIP), which captures the industrial production growth, had expanded by 8.5 per cent in November 2017.

“The industrial production number has disappointed coming in at a flattish level of 0.5 per cent. While the adverse base and the post festive winding down of momentum along with fewer working days was expected to lower the industrial production growth, the magnitude of correction has been sharper,” said Shubhada Rao, chief economist, Yes Bank. She said that tighter domestic financing conditions may also have played a part.

“Going forward, incrementally improving liquidity, normalisation post festive related disruptions and election related spending could get growth supportive enabling higher prints versus today’s industrial production number. However second half of 2018-19 average growth will be lower than first half, as also corroborated by advance estimates of GDP,” said Rao.

The CSO data on Friday showed that manufacturing sector, which constitutes 77.63 per cent of the Index of Industrial Production (IIP), contracted by 0.4 per cent in November as against a growth of 10.4 per cent a year ago.

The mining sector posted 2.7 per cent growth during the month as against 1.4 per cent in November 2017.

Output in only 10 of the 23 industry groups saw positive growth, suggesting a broad-based slowdown.

Capital goods, which is a barometer of investment activity in the economy, declined by 3.4 per cent, compared to 3.7 per cent growth a year ago. The consumer durables growth also dipped by 0.9 per cent as against a growth of 3.1 per cent a year earlier.

Consumer non-durable goods also saw a contraction of 0.6 per cent as compared to 23.7 per cent growth a year ago. In terms of industries, 10 out of 23 industry groups in the manufacturing sector showed positive growth during November 2018.