HOME > BUSINESS > India’s core economy slipping badly – Crisil on IIP

India’s core economy slipping badly – Crisil on IIP

The consistent weakness in India’s core industries, particularly electricity generation and mining, does not bode well for the overall economy, Crisil Research, a unit of Crisil Ratings Group, warned.

According to IIP (Index of Industrial Production) numbers, India’s industrial output grew just 0.6 percent in February, a tenth of what would be considered an acceptable level of growth at present.

Mining and quarrying, and electricity output contacted by 8.1 and 3.2 per cent respectively, leading to a 2.5% dip in the ‘core sector’ IIP. The eight core industries, including energy and metals, contribute nearly 38 per cent weight to the overall IIP.

Other core sector numbers such as those for crude oil, coal, natural gas and fertilisers also fell during February.

Worryingly, consumer durables’ output, in contrast, continued to decline for the third consecutive month, suggesting a weak household demand, even though overall manufacturing index was up 2.2%.

Crisil Research called the mining and power generation numbers as “the worst performance in several years.”

It said coal and gas shortages are partly to blame for the fall in power generation for the first time in several years.

“This, along with the fact that mining output has contracted in 18 out of past 20 months leaves us with a key question – can we reverse industrial decline without rebuilding India’s core industries? The answer is clearly no,” it added.

“For sustainable industrial revival, India needs to push infrastructure and industrial investments. The turnaround in the investment scenario critically depends on assured fuel availability.

“In addition, India needs to create a competitive business environment by solving issues related to procedural delays, to attract foreign direct investment as well as spur investments from Indian companies. These would, in turn, help create jobs, improve incomes, and raise household consumption,” it warned.

Even though the government and economists are banking on normal monsoons, pre-election government spending and a marginal reduction in the lending rates to boost sentiment, Crisil warned that they could only deliver a “temporary respite to consumption.”

Follow ULTRA.news