Country's industrial output to expand 5-6% in FY19: CARE Ratings Report

The country's industrial output is expected to log five to six per cent growth in this fiscal, bettering 4.3 per cent growth rate clocked in the previous fiscal.

A report by CARE Ratings, improvement in consumer goods, capital goods and infrastructure sector will spur higher industrial output growth. Mining and manufacturing sectors are also slated to grow faster in FY19, contributing to the higher industrial output rate.

In FY18, the Index of Industrial Production (IIP) grew by 4.3 per cent, lower than 4.6 per cent in 2016-17. The IIP growth, however, was the best in six years barring 2016-17. In 2017-18, the manufacturing sector expanded by 4.5 per cent, the highest since  FY14 due to restocking activities are undertaken by the sector after the implementation of Goods & Services Tax (GST).

Within the broad manufacturing basket, capital goods logged 4.4 per cent growth whereas infrastructure and consumer non-durables registered 5.5 per cent and 10.3 per cent growth respectively, aiding the overall growth.

According to the report, investment in this fiscal is only likely to pick up gradually and will reach to 29 per cent of the Gross Domestic Product (GDP). It foresees a limited central government spending in 2018-19 due to the impending general elections and the focus could drift to revenue expenditure.

State governments, on the contrary, are likely to enhance spending only incrementally given their strained fiscal conditions. Gross Capital Formation in 2017-18 is seen at 28.5 per cent of the GDP as per the second advance estimate of the Central Statistics Office (CSO). On a comparative note, the figure is almost the same as FY17 but lesser than 34.3 per cent achieved in 2011-12.

CARE Ratings believes the Union government's fiscal deficit target of 3.3 per cent for this fiscal is tough to achieve and is contingent upon realization of the projected Rs 800 billion disinvestment target, higher GST collections and increased tax revenues. The recent spurt in crude oil prices, triggering higher prices of petrol and diesel is already exerting pressure on the central and state governments to slash duties/VAT (value added tax) rates which could widen fiscal deficit beyond the Budgeted levels.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel