The index of the eight core industries, which is believed to be the leading indicator of India’s GDP numbers, plummeted 5.2 % for the September 2019 year-on-year basis, posting its worst performance in 14 years.
This has been its worst show in over a decade. Seven of the eight core sectors (except the fertilizer sector) are in the contraction mode. Eight core sectors contribute to more than 40% in the IIP index. Coal output , being the key factor that registered 20.5% fall in September due to excess monsoon which flooded Coal India’s largest coal mines. Mining output too fell by 8.5 percent in the month as against 0.1 percent growth in the corresponding period last fiscal.
The power generation sector output dipped 2.6 percent in September, compared to the 8.2 percent growth in the year-ago period. The extended monsoon was responsible for a slump in construction activity pushing steel and cement output into negative terrain. Coal India has been unable to meet its monthly production due to accidents, strikes and weather events in recent times. It managed a 7% increase in output to 606 million tonnes. Over 40% of India’s coal demand from power generators, cement, and sponge iron makers had to be met by imports. The miner had been complaining of difficulties of land acquisition to explore new mines and it is doubtful whether the recent move to open coal mining to FDI will really help. Although, the reversal is expected after the stoppage of southwest monsoon.
Industrial production contracted 4.3 percent in September, mainly due to poor performance in the manufacturing sector. A slowdown was witnessed in the manufacturing sector, which declined by 3.9 percent in September as compared to 4.8 percent growth a year ago. The Indian economy which is facing a structural slowdown due to declining household savings rate and low agricultural growth is raising expectations for further rate cut by RBI.
