Industrial Output declines to 4.3%, Lowest in 8 years

The recent report by the national statistical office (NSO) of Index of Industrial Production (IIP) depicted a sharp decline in Industrial output to 4.3% during September. This is the lowest level of industrial output in 8 years.

The Downfall

Spanning the years, 2004-05 and 2011-12, the industrial production has steeped lower than the October 2011 decline. Thereby, underpinning fear concerning severe demand compression in the economy. The major sectors of IIP including manufacturing, mining, and electricity have faced shrinkage for the first time since November 2012. Unusually the shortfall is at the time when companies step up production to accommodate for the festive requirement.

Industrial Output Downfall

The manufacturing sector worsened with 3.9% against 4.8% expansion. On the other hand, the mining sector dropped by 8.5% contradicting 0.1% growth. Additionally, a 9.9% fall was observed in the consumer durables field beside a 5.4% enhancement earlier this year.

Factors Affecting the Fall

Analysts had suspected a reduction considering the downfall of 8 core infrastructures in September. However, the magnitude of the fall was least expected. Further, the floods in major states were moderately the reason for poor mining thereby leading to less output of coal. Moreover, deprived investment, unfavorable base effect and consumer durables indicated the distress.

Implementation of Certain Measures

Addressing the sharp economic slowdown, the government orchestrated a series of solutions to revive advancement. Experts advised that these measures are yet to prove fruitful. Accordingly, the tax cuts by Reserve Bank of India (RBI) might have a significant influence on economic advancement. Further, Chief Economist believes that the facilitation of additional rate cuts by monetary authorities is to improve overall performance.

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