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MOSL: ECOSCOPE-IIP growth slows down in March-Broad-based deceleration in manufacturing sector pulls down growth

ECOSCOPE: IIP growth slows down in March; Broad-based deceleration in manufacturing sector pulls down growth

 

• The Index of Industrial Production (IIP) growth slowed down to 4.4% in March 2018 from 7%+ in the previous three months, as the favourable base effect dissipated in the month. The number was below our estimate/market consensus of a 5.6%/6.2% rise.
• Lower IIP growth can be primarily attributed to the manufacturing sector, where growth slowed down to 4.4% in March 2018 from an average of 9.1% in the previous three months. The deceleration was broad-based, with ~51% of the sector (v/s 28% in February 2018) reporting growth of less than 5%. 12 of the 23 industries within manufacturing witnessed a contraction in output.
• As per use-based classification, output of capital goods declined by 1.8% YoY in March after growing in double-digits over the previous three months.  Growth in the output of consumer durables was also weak at 2.9%.
• IIP growth decelerated to 4.4% in FY18 from 4.6% in the previous year. We expect growth to come in at ~5.5% in 1HFY19, slightly lower than +6% in 2HFY18. For full-year FY19, we expect growth to improve slightly to 4.6%.