From UPSC perspective, the following things are important :
Prelims level : IIP
Mains level : Economic Slowdown
India’s Index of Industrial Production (IIP) slid 1.1% in August 2019 amid worrying signs of an economy. This pulled down the overall growth of the index to 2.4%.
Signs of a problem
- Passenger vehicle sales in the country dropped 24% in September — the 11th month of decline in a row. Car sales are taken to be the benchmark for a market economy’s health.
- The index for electricity production also slipped by 0.9%. Power output is generally tied to its demand, which signifies economic activity.
- The mining index grew only 0.1%.
- Agriculture has been lackluster for quite some time exacerbated by a series of droughts. The monsoon this year was delayed and erratic and there are complaints of droughts in many states.
- 15 out of 23 industries in the manufacturing sector shrank in August.
- Manufacture of motor vehicles, trailers and semi-trailers tanked the fell the most – 23%.
- Machinery and equipment shrank 21.7% while ‘other manufacturing’ slipped 18%.
- Growth was seen in mostly less value-adding industries such as basic metal manufacturing.
- Capital goods shrank 21% while infrastructure and construction goods fell 4.5%.
The government tried to solve
- The government has cut corporate taxes to boost consumer demand and spending.
- RBI has been reducing lending rates to increase the availability of funds.
In this situation, shrinking manufacturing can increase job losses and signify that consumer demand remains muted.
IIP and PMI