India’s industry is in trouble, with the index of industrial production declining by 0.4% in October 2008. Recent months have seen a distinct slowdown of production but this is the first time that there has been a decline. The main cause is a 1.2% decline in the manufacturing index even as the mining and electricity indices grew a bit.
The decline in manufacturing is not surprising, as companies have been cutting production in recent months with measures like running factories for fewer days in a week and running on fewer shifts. Among industries, with large weights in the index, which contributed to the decline are chemicals (-5.5%), food products (-2.9%), cotton textiles (-9.6%) while there were other industries which declined more: wood (-14.4%) and leather (-18.1%).
Intermediates and consumer goods were worst affected. Going by the current trends, the IIP numbers of the next few months too will look bad. They may not necessarily decline, as there is a base effect plus fluctuations in monthly numbers at play here. The effect of slowing industrial production will be visible in the December quarter numbers, a quarter which will be full of surprises.