Moneycontrol Bureau

Industrial activity, as measured by the Index of Industrial Production (IIP), remained unchanged at 0.4 percent against 0.5 percent, which was later revised to 0.4 percent, on a month-on-month basis led by a contraction in the manufacturing and capital goods growth.

A CNBC-TV18 poll of economists had estimated IIP to come in at 2.4 percent on the back of a pick up in industrial activity and better core sector numbers.

Manufacturing sector growth stood at -1.4 percent against -1 percent, while the capital goods growth shrunk further to -11.3 percent against -3.8 percent on a month-on-month basis. Consumer goods growth stood at -6.9 percent against -7.4 percent (MoM).

Also Read: August IIP disappoints; experts await CPI next week

Terming the IIP data as ‘shocking’, Rupa Rege Nitsure, chief economist and GM, Bank of Baroda , said she had expected the industrial activity to grow above 2 percent in August.

“If you look at non-oil, non-gold imports growth, they have firmed up. It is closer to 9 percent and that is very highly correlated with overall economic activity. Maybe there is some room to believe that overall gross domestic product (GDP) growth for Q2 will be driven more by service sector than manufacturing sector. However, 0.4 percent is shockingly low,” she tells CNBC-TV18.

According to an ICRA note, the initial data released by the Central Electricity Authority (CEA) suggests that electricity generation expanded by a robust 13 percent in August 2014, driven by the sharp 22 percent growth of thermal electricity generation. Moreover, provisional data released by Government of India indicates that excise duty collections rose by 8 percent in August 2014, which may be an outcome of an improved manufacturing performance in that month.

“In particular, automobile production expanded by a substantial 15 percent in August 2014 (Source:SIAM) and given the favourable base effect (decline in IIP growth from 2.6 percent in July 2013 to 0.4 percent in August 2013), industrial output is likely to display a mild uptick in August 2014 as compared to the weak 0.5 percent rise in July 2014,” it said.

Within the monthly IIP data, growth in its respective components (MoM) stood at:

Manufacturing sector growth at -1.4% vs -1%

Electricity sector growth at 12.9% vs 11.7%

Mining sector growth at 2.6% vs 2.1%

Capital goods growth at -11.3% vs -3.8%

Basic goods growth at 9.6% vs 7.6%

Intermediate goods growth at 0.3% vs 2.6%

Consumer durables growth at -15% vs -20.9%

Consumer non-durables growth at -0.9% vs 2.9%