New Delhi: India’s industrial output in September may have contracted for the second consecutive month, possibly at a sharper pace. The data will be released on Monday evening.
Data released earlier this month showed core sector data measuring the eight infrastructure sectors contracted 5.2% in September, worst in 14 years, pointing to a deepening industrial downturn. Core sector constitutes 40% of industrial production. In August, core sector shrank 0.5%, leading to a contraction in the index of industrial production (IIP) by 1.1%.
The persistent slowdown in industrial growth may force the central bank to go for another round of policy rate cut in December. Indian businesses have been battling demand slowdown and liquidity crunch, which resulted in economic growth rate cooling to a six-year-low of 5% in the June quarter, while private consumption expenditure was at an 18-quarter-low of 3.1%.
The International Monetary Fund last month cut its growth forecast for India to 6.1% from 7% earlier for 2019-20, citing corporate and environmental regulatory uncertainty, together with concerns about the health of the non-bank financial sector, that has weighed on consumption demand. On Friday, rating agency Moody’s cut India’s sovereign outlook to negative from stable citing lack of intent for reforms in India and a prolonged economic slowdown. It maintained a second lowest investment grade rating for India.
The Narendra Modi administration has taken a series of steps to reverse the growth slowdown, including a cut in the corporate tax rate in September to 22% from 30% for companies not availing of any tax breaks and to 15% from 25% for new manufacturers. The Cabinet cleared a proposal last week to set up a ₹25,000 crore debt fund to finish incomplete housing projects, a move that is expected to boost cement and steel sectors in the coming months.