Industrial growth slows to a three-month low of 3.7% in June

economictimes.indiatimes.com:

manufacturing output owing to pressures from the global slowdown and lower domestic demand pushed industrial growth to a three-month low of 3.7% in June compared with 5.3% in May, belying hopes of a broad-based recovery, according to experts. “The sequential slowdown was led by the manufacturing sector, while the mining and electricity sectors witnessed an improvement in their growth performance amid deficient rainfall in the month,” said Aditi Nayar, chief economist, Icra.

Manufacturing, which has a weight of 77.6% in the Index of Industrial Production, grew at its slowest pace of 3.1% in three months, even as electricity and mining outperformed, showed a government data release on Friday. While experts expect weakness in external demand to persist, Rajani Sinha, chief economist, CareEdge, indicated a domestic demand recovery is important for the revival of industrial activity.

“Domestic demand faces headwinds from the uptick in inflation fuelled by an acceleration in food prices. Moreover, weather-related uncertainties could play a spoilsport for the recovery in rural demand,” Sinha pointed out as risks to recovery.

Dharmakirti Joshi, chief economist, Crisil added weak monsoons as another factor threatening the recovery of industrial activity. “A weak El Niño has set in as expected, the timing and intensity of which will weigh on the performance of rains for the rest of this ongoing monsoon — and thereby rural performance,” Joshi said.Manufacturing lagsWhile electricity and mining recorded a faster pace of expansion compared with the previous month at 4.2% and 7.6%, respectively, 14 of the 23 manufacturing sub-sectors contracted in the month.