Industrial output shrinks 3.8% in Oct, inflation at 40-month high

CPIU inflation soars, IIP shrinks
The industrial output in 18 of the 20 manufacturing sectors fell in October.

Index of industrial production: The government got a flurry of bad news on Thursday. The October industrial output fell 3.8% compared with the same month last year, recording the third consecutive month of decline, while retail inflation soared to a 40-month high of 5.54% in November on the back of high food prices.

The cumulative growth of industrial output, measures by index of industrial production (IIP), for the April-October period this year was just 0.5% compared with the same period last year. The output in key sectors such as mining, manufacturing and electricity declined by 8%, 2.1% and 12.2% respectively compared with October 2018. The growth in these sectors for the April-October period was -0.4%, 0.5% and 1.6% respectively.

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The output in 18 of the 20 manufacturing sectors fell in October. Computers, electronic and optical products recorded the steepest fall at 31.3%, followed by motor vehicles, trailers and semi-trailers that recorded a 27.9% fall. Chemicals and chemical products recorded the highest growth in October at 31.8%, followed by basic metals that grew at 9.4%.

Inflation measured in terms of consumer price index rose to 5.54% in November, dimming the hopes that the Reserve Bank will continue its rate cuts after the pause in November. The October figure is way higher than the analysts estimates and is the highest level seen since July 2016.

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The twin blows come at a time when the Modi government is struggling to revive the economy that is facing a slowdown. Indian economy grew at 4.5% in the three months to September, the slowest pace since Narendra Modi took over as the prime minister of the country. The previous three months had recorded an equally dismal 5% growth. The government’s efforts to boost demand and encourage private investment are yet to show results.