Registers poorest performance in seven years due to a sharp decline in production of capital goods and consumer durable.

Signs of slowdown became more pronounced as the government data on Friday revealed factory output shrank by 1.1% in August, recording the poorest performance in seven years due to a sharp decline in production of capital goods and consumer durable.

Industrial production growth for the first time in more than two years has treaded into negative territory.

The Index of Industrial Production (IIP) had shown a growth of 4.8% in August 2018. The previous low in IIP was (-) 1.7% in November 2012.

The manufacturing sector, which contributes over 77% to the IIP, contracted by 1.2%, the lowest in five years, as against a growth of 5.2% in the year-ago month, according to the data released by the National Statistical Office (NSO).

The previous low in the manufacturing segment was recorded at (-) 1.8% in October 2014.

The data revealed that electricity generation growth too was in negative at (-) 0.9% as against an expansion of 7.6% in the year-ago month while the mining sector growth was flat at 0.1%.

Earlier this month, the RBI revised downwards its GDP growth forecast for the current fiscal to 6.1% from the previous estimate of 6.9% after the first-quarter economic growth slipped to over six-year low of 5%.

Providing further details of the IIP, the NSO data showed the worst performance came from the capital goods segment as its output shrank by over 21% as against an expansion of 10.3% in August last year.

Consumer durables output too declined by 9.1% in August 2019 as against 5.5% growth in the same month of 2018.

Another poor performing segment was infrastructure/ construction goods. It showed a decline of 4.5% in August 2019 as against a growth of 8% in the corresponding month of last year.

‘Intermediate goods’ sector, however, showed a healthy growth of 7%, up from 2.9% in the year-ago month. Consumer non-durables segment posted an expansion of 4.1% in August. This compares with 6.5% expansion in August 2018.

In terms of industries, 15 out of the 23 industry groups in the manufacturing sector have shown negative growth during August 2019 as compared to the corresponding month of the previous year.

Commenting on the IIP numbers, K. Joseph Thomas, head of research, Emkay Wealth Management, said the data amply reflected the underlying weakness in manufacturing and industrial activity which needed to be addressed without much loss of time for economic recovery.

Moody’s Investors Service on Thursday slashed its 2019-20 GDP growth forecast for India to 5.8% from 6.2% earlier, saying the economy was experiencing a pronounced slowdown.

Meanwhile, the NSO revised upwards the IIP growth for July to 4.6% from the earlier estimate of 4.3 per cent.