Feb Factory Output Growth at 0.1%, Slowest in 20 Months.

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Q4 GDP growth likely to remain muted; RBI may cut rates; data to increase scrutiny of govt’s economic record

Industrial growth fell to its lowest in 20 months in February, barely rising from a year ago as manufacturing contracted following muted consumer demand, and public investment slowed toward the fiscal year-end. The index of industrial production (IIP) rose 0.1%, the slowest since a 0.3% contraction in July 2017, data released by the statistics office showed. This was well below the consensus estimate of about 2% for February. January growth was revised down to 1.4% from 1.7% estimated initially. It was 6.9% in February 2018. “Industrial growth at 0.1% came as a shock… all sectors have failed to deliver,” said MadanSabnavis, chief economist, CARE Ratings. The data will increase scrutiny of the government’s economic record as it battles perceptions of poor jobs growth amid the ongoing general election.

 Manufacturing, which has the highest weight in IIP (77.6%), contracted 0.3% in February. Mining output rose 2% in February while electricity generation was higher at 1.2%. “Clearly, growth does not hold out any promise, and monetary policy must do heavy lifting given lack of fiscal space,” said SoumyaKanti Ghosh, group chief economic adviser, SBI, pencilling in chances of a rate cut by RBI in June. The advance indicators do not suggest any immediate recovery. Auto sales declined 8% in March with all segments — two-wheelers, three-wheelers, passenger cars and commercial vehicles — reporting lower sales than in the year before. India’s economy is estimated to have grown 7% in FY19 and according to RBI estimates could post a modest recovery to 7.2% in the current fiscal. “This implies that Q4 FY2019 GDP is likely to sequentially lose momentum further,” said B Prasanna of ICICI Bank.


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