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India’s industrial output contracted by 1.1 percent month-on-month (MoM) in August, according to the Index of Industrial Production (IIP) data released by the government on August 9.
Industrial output, or factory output, is the closest approximation for measuring economic activity in the country's business landscape.
Manufacturing output, which accounts for more than three-fourths of the entire index, fell 1.2 percent in August, against a 4.2 percent rise in July.
Mining grew 0.1 percent in August against a growth of 4.9 percent in July.
For the April-June period, the eight infrastructure sectors averaged 3.6 percent growth. Exports contracted 1.7 percent during the same period.
India's gross domestic product (GDP) growth in the March quarter slowed to a five-year low of 5.8 percent, down from 6.6 percent in the December quarter. Annual GDP growth slowed to 6.8 percent for the year that ended on March 31 from 7.2 percent in the previous year.
Factory output, which is measured by the index of industrial production (IIP), contracted in March 2019. This was its first such contraction in 21 months, showing declining momentum of both investment and consumption. Even core industries productions of steel, electricity, coal and cement are falling or have been stagnant in recent quarters.
The national income data have reinforced signs that were emanating from a slew of shop-end data, such as car and consumer goods sales, often seen as proxy indicators to gauge trends in household spending.
To combat the slowdown, Finance Minister Nirmala Sitharaman announced a cut in corporate tax rates in September, bringing it down to 22 percent from 30 percent for existing companies, and to 15 percent from 25 percent for new manufacturing companies.
Earlier this year, the International Monetary Fund cut India’s gross domestic product growth forecast for 2019-20 by 20 basis points to 7.3 percent, followng similar action by the Asian Development Bank and the Reserve Bank of India (RBI).