Index of Industrial Production in April got contracted

From the celebrations of GDP growth, Modi government should now focus on the IIP contraction. As the Modi government were celebrating for the GDP growth of 7.9, Factory growth was declined up to 0.8 per cent. As the factory growth declined upto 0.8 per cent, it has lead the government to examine the cause of the decline and taking time out from the celebrations and should find out the what to  recover economy.

IIP Contraction

IIP Contraction

Main purpose of decline in the Index of Industrial Production is the lack of investment from private sector. This reason have dragged down the whole investment activity which could be seen in the goods segment’s capital. This segment have came down upto 25 per cent in the month of April. It is the fourth consecutive month of contraction. Economists are seeing the goods of capital to cope-up with the investment activity over the ground. This decline have been seen because of lack of investment from the private sector and momentum from public spending.

Rishi Shah, an economist from Deloitte said that “Figures show that the lack of momentum from the private sector investment may be taking huge charge over the sector of capital goods which has consistently been contracted for the sixth month. Recovery in the industrial sector looks different and growth depends on the shaping up of demand after the monsoons”.

If we take a quick look towards the Growth of manufacturing, this segment has been declined to 3.1 per cent in this month which was grown at the rate of 2 per cent as compared to previous month. Recently, PMI number have been released that also shows the slow down in the manufacturing activities. Market data also showed the manufacturing output was growing at a slow rate of 5 per cent which was said to be barely improving. Indicator of the Manufacturing which is the composite indicator, which was at 50.5 in April now stood at 50.7 in May. It is the slowest reading since from the end of 2013. In this reading above 50 represents expansion while below 50 represents contraction.

In the April month IIP, nine companies out of 22 have shown contraction and the only things which has grown from may is the electricity generation which has shown the growth of 14.6 per cent which was 5.6 per cent in the march month. But here a question arises which is, if there is no growth in the industry and it is struggling to grow then what is the reason behind the growth of electricity generation.

If seeing the positive side its seen that there is still demand from individual customers from durable goods.