Election uncertainty, base effect: Experts on why IIP fell 1.8% in Oct

Mumbai: Adverse base effect and weak manufacturing sector growth led to contraction in India’s industrial production in October, say economists.

Factory output or IIP slumped 1.8 per cent in October as against a growth of 8.4 per cent in the year-ago period. The data was released after market hours today.

“An adverse base effect, weak core sector performance and sector specific issues for sugar, gems and jewellery negated any pickup in consumption related to the kharif harvest and festive season as well as healthy exports growth,” Aditi Nayar, senior economist at ICRA, said.

The manufacturing sector, which forms over 75 per cent of the index, declined by 2 per cent in October as against a growth of 9.9 per cent in the same month a year ago.

The mining sector, with a weight of about 14 per cent in IIP, also saw a contraction of 3.5 per cent in October as against a dip of 0.2 per cent in the same month last fiscal.

Electricity sector posted a growth of 1.3 per cent in the reporting month as against 5.5 per cent a year ago. The consumer durables witnessed a de-growth of 12 per cent as against a growth of 16.7 per cent in the same month last year.

“Growth in the electricity segment has turned volatile during this year and the consumer durables sector posted negative growth rates consistently for 11 months in a row since December 2011,” Arun Singh, senior economist at Dun and Bradstreet, a business information firm, said.

Singh said although the basic goods sector has been weak this fiscal, a slip into the negative zone indicates industrial activity will remain restrained going ahead.

Basic goods growth contracted 1.6 per cent in October as against a growth of 4.3 per cent in the corresponding month last year.

Singh said pre-general election uncertainty is likely to take a toll on the industrial activity and IIP growth is expected to remain subdued in near term.

PTI