At 0.1%, India's industrial growth falls to 20-month low in February

A contraction in manufacturing output, especially in the sensitive capital and consumer goods segment, pulled down industrial growth to a 20-month low of just 0.1 per cent in February.
The bottom crawling growth rate follows a 1.43 per cent growth in the previous month of January. The index of industrial production (IIP) has witnessed low growth since November, 2018, and is expected to remain muted owing to weak exports, rural distress, credit constraints and uncertainty over the election outcome, according to economists.

In the April-February period of the current financial year, industrial output grew at 4 per cent, as against 4.3 per cent in the same period of the previous financial year.
The manufacturing segment, which constitutes the bulk of the index of industrial production (IIP) at 77.6 per cent, contracted by 0.3 per cent in February against an equally small rise of 0.93 per cent in January. Before, this, the December 2018 manufacturing number of 2.95 per cent. The numbers show continued volatility in the IIP, despite change in the index last year.
Most of all, the capital goods segment, which connotes investments, saw output growth turning to negative with an 8.8 per cent contraction, as compared to a 3.42 per cent contraction in the previous month.
Driven by machinery and heavy transport, capital goods production had been on a solid upward swing till October.
“The capital goods sector, which had shown an average growth of 8.9 per cent during April-October period in FY19 and raised hopes of an incipient investment recovery in the economy is once again appearing to be losing steam. With the exception of December 2018, capital goods are recording negative growth in each month since November,” Devendra Kumar Pant, Chief Economist at India Ratings and Research, said.
In January, the growth rate for consumer durables also fell to 1.2 per cent, from the 2.3 per cent growth in January. “A 1.2 per cent consumer goods production is also reflective of inventories that have built up in Q3, when capacity utilisation also improved. But, with demand tapering off, production has slowed down,” Madan Sabnavis, chief economist at CARE Ratings, said.
On the other hand, consumer non-durables commanded a growth rate of 4.3 per cent in February, up from 3.3 per cent in January. All other user-based segments either showed a negative growth or low-single digit growth.
Overall IIP growth for the entire year would be about 4.5 per cent, which is half per cent lower than what we had projected earlier, Sabnavis added.
Of 23 sub-sectors within manufacturing, 13 recorded a year-on-year contraction, compared to 11 in January. Slowdown in major sectors such as metals and refined petroleum brought down overall growth. On the other hand, apart from furniture and food manufacturing, which saw healthy growth in the financial year, computer hardware production managed to see a healthy growth.
This is after the government pushed manufacturing in the sector on a sustained basis over the past nine months, through a series of benefits and the phased manufacturing programme aimed to reduce imports of electronics goods.
The two other sectors in the IIP — electricity and mining — also saw muted growth in February, data released on Friday showed.
Electricity generation rose 1.2 per cent in the latest month, slightly more than the 0.93 per cent rise in January. On the other hand, mining output grew by 2 per cent in February, against a 3.92 per cent rise in January.
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India's April-February fiscal deficit at 134% of FY target: Govt data

The country's fiscal deficit touched 134.2 per cent of the full-year revised budgeted estimate at the end of February 2019, mainly due to tepid growth in revenue collections, official data showed Friday.
In absolute terms, the fiscal deficit for April-February 2018-19 was Rs 8.51 lakh crore as against the revised estimate (RE) of Rs 6.34 trillion for the entire year, according to Controller General of Accounts (CGA) data.

However, Economic Affairs Secretary S C Garg told reporters that the government is committed to restrict the fiscal deficit at 3.4 per cent of the Gross Domestic Product (GDP) as envisaged in the Budget.
The CGA data revealed that revenue receipts of the central government was Rs 12.65 trillion or 73.2 per cent of the revised budgetary estimate (BE) at February end. In the same period last fiscal, the revenue collection was 78.2 per cent of the estimates.
The government's tax revenue stood at Rs 10.94 trillion and non-tax revenue was Rs 1.7 trillion.
Total expenditure incurred by the government during April-February 2018-19 was Rs 21.88 trillion (89.08 per cent of RE), of which Rs 19.15 trillion was on revenue account and Rs 2.73 trillion on capital account.
Out of the total revenue expenditure, Rs 5.01 trillion was on account of interest payments and Rs 2.63 trillion on major subsidies.
Meanwhile, the finance ministry in a statement said that Rs 5.96 lakh crore has been transferred to the state governments as devolution of a share of taxes by the central government up to February, which is Rs 67,043 crore higher than the corresponding period of the last year 2017-18.

Services PMI gains momentum, rises to 52.5 in Feb from 52.2 in Jan

The country's services sector activity gathered momentum in February, driven by a quicker expansion in new work orders that supported a faster increase in output and job creation, a monthly survey showed Tuesday.
The seasonally adjusted Nikkei India Services Business Activity Index rose from 52.2 in January to 52.5 in February, indicating an upturn in output.

The services PMI was in the expansion territory for the ninth straight month. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
New business received by services companies rose to a greater extent in February amid strengthening underlying demand, the survey said adding that the upturn in new orders in the services sector was domestically driven, as highlighted by a renewed contraction in external sales.
According to Pollyanna De Lima, Principal Economist at IHS Markit, and author of the report, "Faster increases in new work and business activity supporting one of the best upturns in jobs for eight years."
Meanwhile, the seasonally adjusted Nikkei India Composite PMI Output Index, that maps both the manufacturing and services industry, rose from 53.6 in January to 53.8, indicating acceleration in private sector activity in the country.
"Indian economic growth strengthened halfway through the final quarter of FY18 to the second fastest since last July. The acceleration was driven by a thriving manufacturing sector, where production growth hit a 14-month high," Lima said.
Lima further noted that manufacturing new export orders rose at a sharp rate against a backdrop of weakening global demand and trade frictions. When looking at other emerging markets, PMI data showed that the Indian goods producing industry outperformed those in Brazil, Russia and China by a considerable margin.
Meanwhile price pressures waned as almost 97 per cent of panellists reported no change in their selling prices.
According to experts, the signs of easing inflationary pressures indicate that the Reserve Bank of India (RBI) is likely to adopt an accommodative monetary policy stance.
The next meeting of RBI's Monetary Policy Committee is scheduled on April 2-4.
Meanwhile, India's economic growth slipped to a 5-quarter low of 6.6 per cent in October-December period of 2018-19, mainly due to poor performance of farm, mining and manufacturing sectors, as per official data.

Feb IIP growth dips to 7.1%; March retail inflation at 5-month low of 4.28%

Maintaining high growth for the fourth month in a row, industrial production grew at 7.1% in February, mainly driven by robust performance of the manufacturing sector coupled with higher offtake of capital goods and consumer durables.
Retail inflation slowed to five-month low of 4.28% in March, the third consecutive month of decline, mainly on account of easing food prices including vegetables, government data showed today.

Factory output measured in terms of the Index of Industrial Production (IIP) had grown by 1.2% in February 2017, as per data released by the Central Statistics Office (CSO) today.
The IIP recorded a growth of 8.54% in November, 7.1% in December and 7.4% in January, as per the revised data.
During April-February, IIP growth has slowed to 4.3% from 4.7% in the same period last fiscal.
The inflation based on Consumer Price Index (CPI), a key data factored in by the RBI to arrive at interest rate, was 4.44% in February.
However, the March 2018 inflation is higher than 3.89% recorded in the same month last year.
As per data released by the Central Statistics Office (CSO), inflation in the vegetables segment cooled to 11.7% in March from 17.57% in the previous month.
Manufacturing sector, which constitutes over 77% of the index, grew at 8.7% in February as compared to almost flat growth of 0.7% in the same month a year ago.
Similarly, capital goods output rose by a robust 20% in the month under review as against a contraction of 2.4% earlier.
The rate of price rise in the protein rich items like eggs, milk and other products too moderated in March as against the previous month.
However, inflation in fruits basket was higher.
Consumer durables too grew at 7.9% as against a contraction of 4.6% in February 2017. Electricity generation also grew by 4.5% compared to 1.2%.However, mining output declined by 0.3% against a growth 4.6% earlier.
As per use-based classification, the growth rates in February 2018 over February 2017 are 3.7% in primary goods, 3.3% in intermediate goods and 12.6% in infrastructure/construction goods. The consumer non-durables sector recorded a growth of 7.4%.
In terms of industries, 15 out of the 23 industry groups in the manufacturing sector have shown positive growth during February 2018.
Overall, inflation in the food basket was 2.81%, lower than 3.26% in February.
The CSO data further revealed that inflation in the fuel and light segment also came in lower at 5.73% month-on-month basis.
"The outlook on inflation continues to remain data-dependent, but risks remain largely to the upside, especially from expectations of a rise in crude oil prices due to international output cuts, further hardening of domestic consumption, and continued impact of HRA (house rent allowance) increase.
"We expect that inflation expectations in the period ahead will possibly be shaped by oil price movement, impact of minimum support prices inclusion, fiscal slippage as GST collections remain low, and monsoon forecasts. A greater challenge would be for the RBI to set policy sentiments correctly in the coming period as higher yields, inflationary pressures and election cycle in India and US both are likely to lead to market volatility. We expect inflation prints to hover around the 5-percent mark in FY18-19," said Anis Chakravarty, lead economist, Deloitte.
"We expect RBI to revise its FY19 inflation rate projection upwards. We expect CPI inflation to overshoot RBI's forecast to average 4.7-4.8% in FY19 compared with 4.5% in FY18. While today's CPI print of 4.28% came in well within RBI's projected rate of 4.5%, the risk to inflation going forward lies on the upside. As such, we expect RBI to respond with a rate hike during the third quarter of FY19. A generalized increase in food prices amid pick-up in rural economic activity could add to upside risks to core inflation going forward," said Garima Kapoor, economist, Elara Capital.

February export growth rate dips for third straight month at 4.48%

A contraction in major exchange earning sectors such as textiles and engineering goods meant that India’s exports growth continued to slacken for the third straight month in February, with outbound shipments rising at 4.48 per cent, effectively half of January’s 9.07 per cent growth rate.
A similar situation was seen in December 2017 as well when growth rate had halved to 12.4 per cent from November’s 30.5 per cent.
Of the 30 major product groups, 20 were in the positive territory in January, against 21 in December.
A sizeable chunk of India’s major export segments saw a contraction in February. They are engineering goods, exports of which went down by 1.88 per cent after a 15.77 per cent rise in January as well as gems and jewellery, which contracted 5.14 per cent after rising by a marginal 0.89 per cent in January.
Also, the volatile segment of refinery products saw a slower growth of 27.44 per cent, down from the much higher 39.5 per cent growth rate in January.
However, some products rose at a faster clip such as pharmaceuticals, exports of which grew 13.92 per cent after 8.6 per cent rise seen in December. Organic and inorganic chemicals also rose 30.41 per cent, marginally lower than the 33.6 per cent growth rate in the previous month.
A strong growth in imports continued in February. Imports rose 10.4 per cent in the month, lower than the high 26.10 per cent growth seen in the previous month.
This makes the cumulative import bill for the first 11 months of the current financial year at more than $416 billion.
The figures make it clear that India is set to overshoot the $380.36 billion import bill of the previous financial year.
However, the $11.98 billion worth of trade deficit in February was lower than the 56-month high of $16.3 billion in January. “The substantial cooling of the merchandise trade deficit in February 2018 comes as a relief, following a spike in the previous month. Nonetheless, the trade deficit in February 2018 printed considerably higher than the year-ago level, signalling a sharp year-on-year deterioration in the current account deficit in Q4 FY2018 is imminent.” Aditi Nayar, principal economist at ICRA, said.
In this financial year, the deficit has increased to $143.12 till February, against the $97.85 billion in the corresponding period in the previous year.
The deficit was fed by a huge rise in oil imports, which shot up 32.05 per cent to $10.91 billion. This was albeit lower than the 42 per cent jump in oil imports in January, after a similarly large 34.9 per cent rise in the previous month of December 2017.
However, gold imports continue to slip. In February, gold imports contracted by more than 16 per cent to $2.89 billion, following a similar contraction of 22.07 per cent in January.
Traders have blamed a continuing lack of liquidity due to tax refunds under the goods and services tax (GST) regime piling up and a strengthening rupee for the slackening pace of export growth. Even as the Prime Minister’s Office has now stepped into the export refund mess, traders continue to complain about procedural bottlenecks in filing the GST, which haven’t been solved over the last six months, Ajay Sahai, director general at the Federation of Indian Export Organisations, said.