Growth Dichotomy

GS 3: Economy


A slowdown in the expansion of industrial output indicates low consumer confidence.

Slow Industrial Development

· Slow Industrial Output Growth: Compared to the previous month's 10.3% growth, September's IIP growth of 5.8% represented a significant slowdown and fell short of the predicted 7% to 8% growth.

· Economic Indicator: The IIP is an important economic indicator that highlights a worrying pattern of slow industrial production and highlights issues with the general state of the economy.

· Expectations and Concerns: The muted IIP growth, which is below economists' forecasts, prompts questions about industrial momentum and calls into question the factors that contributed to the slowdown and its wider economic ramifications.

Various Sectoral Difficulties

· Sectoral Contractions and Inventory Issues: There were contractions in nine manufacturing sectors in September, with notable declines in the production of clothing and furniture. There was no pre-festive season inventory buildup to look forward to.

· Low Consumer Confidence: There has been little increase in both consumer durables and non-durables, and consumer confidence is still muted. A 3.5% decrease in fast-moving consumer goods suggests consumers are becoming more frugal with their money.

· Resilience and Economic Asymmetry: The IIP illustrates the need for well-balanced economic recovery strategies by highlighting the resilience of investment-linked sectors in contrast to consumer-centric segments' struggles.

Economic Divergence and Upcoming Obstacles:

· The second quarter of 2018 saw an average growth of 7.4% in factory output, which is in line with the central bank's expectations for Q2 GDP growth. This indicates that there are still economic disparities.

· Consumer vs. Investment Sectors: Investment-linked sectors such as infrastructure and construction goods are growing robustly, while consumer goods, particularly durables, are lagging behind pre-COVID-19 levels.

LTX Mains Question

Q. What are the main markers of this decline, and how does the recent slowdown in India's Index of Industrial Production (IIP) represent the difficulties facing the manufacturing sector?

{{Mounica Sukhavasi}}

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