GDP slowdown getting deeper

Is economic slowdown in the country getting deeper? It looks like so with index of industrial production (IIP) contracting by a whopping 4.3 per cent in September, the second consecutive month of decline for the key economic barometer.

In August, it registered a de-growth of 1.4 per cent. Compare that with last year's number. In September 2018, the index clipped at a healthy growth of 4.6 per cent.

The IIP's 2019 September reading is the lowest in last eight years. Data released by the Central Statistics Office (CSO), an official body, revealed that the decline was across key sectors like capital goods, manufacturing, mining and electricity.

The manufacturing sector saw 3.9 per cent fall as compared to 4.8 per cent growth a year ago. Mining output declined by 8.5 per cent in September this year as against a marginal rise in 2018 September. Further, capital goods production, the indicator of fresh investments, registered a whopping 20.7 per cent decline.

This segment saw a healthy 6.9 per cent growth in the corresponding month last financial year. Even consumer durables were not immune to this declining trend.

Consumer durables' output was down by 9.9 per cent while that of consumer non-durables by 0.4 per cent. Manufacture of motor vehicles, trailers and semi-trailers registered highest decline of 24.8 per cent followed by (-) 23.6 per cent in furniture and (-) 22.0 per cent in fabricated metal products.

The slowdown is so deep that 17 out of 23 industry groups in the manufacturing sector reported negative growth. This data gives a clear signal that economy is on a downward spiral.

These gloomy indicators from industrial sector came close on the heels of global rating agency Moody's changing the outlook on India's sovereign rating to 'negative' from 'stable' last week.

It cited increasing risks that would lead to materially lower economic growth than in the past. It also pointed out about a gradual rise in debt from current high levels.

Prolonged financial stress among rural households, weak job creation, and, more recently, a credit crunch among non-banking financial companies (NBFCs) are expected to push down GDP growth, it explained.

The rating agency, however, is of the view that government measures to support the economy will help to reduce the depth and duration of India's slowdown.

In a report on Tuesday, State Bank of India, the country's largest lender, has also painted a gloomy picture about economic growth. According to the State-owned lender, the second quarter (July-September) GDP growth is likely to fall to 4.2 per cent.

It cited low auto sales, flattening of core sector and fall in air traffic as reasons for its projection. For full financial year, it projected a GDP growth of 5 per cent, a steep downward revision from its earlier forecast of 6.1 per cent.

With key economic indicators showing a declining trend, Reserve Bank of India (RBI) is likely to go for yet another rate cut in its December monetary policy review.

Further, the central government may announce more measures to boost growth. But the economic slowdown is real. And it's getting deeper by the day. Time to brace up for a prolonged recession.