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June factory output growth halves to 2.1%

Industrial output grew by 2.1 per cent in June, although down from 4.2 per cent a year ago, on account of poor show by manufacturing and heavy contraction in capital goods production. On cumulative basis, the factory output in the April-June quarter grew by 0.6 per cent compared to 3.3 per cent growth in the year-ago period. 

The June growth was however higher than 1.1 per cent (revised from 1.2 per cent provisionally) in May. Factory output, measured in terms of the Index of Industrial Production (IIP), showed that the manufacturing sector that constitutes over 75 per cent of the index saw a meager growth of 0.9 per cent in June compared to 5.2 per cent a year ago. For the April-June quarter, this sector’s output showed contraction by 0.7 per cent, as against a growth of 3.7 per cent a year ago.

The capital goods output registered a steep decline of 16.5 per cent in June over a contraction of 2 per cent in last year. In April-June, the production of these goods, which are considered as barometer for investment, declined by 18 per cent compared to a growth of 2 per cent in year ago period. Growth in output of consumer durables decelerated to 5.6 per cent in June compared to 16.1 per cent a year ago. The consumer non-durable goods also recorded low growth of 1 per cent in June compared to 2.3 per cent a year ago. Overall, consumer goods production recorded a growth 2.8 per cent in June compared to 7.2 per cent a year ago.

However, the power generation recorded an impressive growth of 8.3 per cent in June compared to 1.2 per cent in the same month a year ago. The mining sector recorded a growth of 4.7 per cent in June year as against a contraction of 0.4 per cent a year ago. In terms of industries, 18 out of 22 industry groups in the manufacturing sector have shown positive growth during the month of June. As per Use-based classification, the growth rates in June 2016 over June 2015 are 5.9 per cent in Basic goods, (-)16.5 per cent in Capital goods and 6.1 per cent in Intermediate goods.

Meanwhile, government said that the Indian economy is showing “bright” near-term prospects, but reducing fiscal deficit to 3.5 per cent of GDP in 2016-17 which is a challenge because of additional liabilities on account of pay revision. 

Exports return to contraction mode with 6.8% slide in July
After rising for the first time in 18 months in June, exports shrank again in July, contracting 6.84 per cent due to decline in shipments of engineering goods and petroleum products. Gold imports, which till recently was a matter of concern for the government, more than halved to $1.08 billion in the month. Merchandise exports totalled $21.69 billion in July as against $23.28 billion in the same month last year. 

Declining exports as well as in imports narrowed the trade deficit in July to $7.76 billion as against $13.09 billion in the year-ago period. Exports have been falling since December 2014 due to weak global demand and slide in oil prices. As per the data released by Commerce and Industry Ministry, imports in July were at $29.45 billion, down 19.03 per cent from $36.37 billion in the same month a year ago. Gold imports dropped over 64 per cent to $1.08 billion, from $2.97 billion in July 2015. 

Import of the precious metal has been declining sharply due to measures like higher customs duty and gold schemes. Gold used to be the second most imported item in the country after petroleum. Government data revealed that imports of petroleum, crude and related products were down 28 per cent in July, while that of coal, coke and briquettes shrunk by about 7 per cent. 

In value terms, imports of fertilisers were down by 25 per cent at $708 million in July. Cumulative value of merchandise exports for April-July 2016-17 was $87 billion as against $90.27 billion last year, a decline of 3.62 per cent. Overall imports in the four month period of the fiscal stood at $113.99 billion, down 16.33 per cent year-on-year. 
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