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Published: May 13, 2023
Updated: May 13, 2023

India's Factory Output Growth Slows to 5-Month Low of 1.1% in March

India's factory output growth slowed to a five-month low of 1.1% in March 2023, down from 5.8% in February 2023. This is the lowest growth rate since October 2022. The slowdown in manufacturing growth was mainly due to slowing global demand and inventory glut.

Slowing Global Demand and Inventory Glut Hit Manufacturing Growth

The slowdown in global demand has been a major factor in the recent decline in manufacturing growth in India. The World Bank has downgraded its growth forecast for India in 2023 to 7.5%, from 8.7% in 2022. This is due to a number of factors, including the ongoing war in Ukraine, which has led to higher energy and commodity prices.

In addition to slowing global demand, inventory gluts have also been a drag on manufacturing growth in India. Companies have been building up inventories in anticipation of stronger demand, but this has led to a decline in production.

Economists Express Concern Over Slowing Manufacturing Growth

Economists are concerned about the slowdown in manufacturing growth and have said that domestic consumption demand will be crucial going forward. They have also pointed out that the contradictory results of factory output shown between the S&P Global Purchasing Managers' Index (PMI) and IIP need to be viewed with caution.

The PMI survey showed that factory output was at a three-month high, while the IIP showed that manufacturing growth was the slowest in five months. This discrepancy is likely due to the fact that the PMI survey is based on a smaller sample size and is more volatile than the IIP.

Government Needs to Take Steps to Boost Domestic Consumption Demand

The slowdown in manufacturing growth is a cause for concern, as it could lead to job losses and a decline in economic growth. The government will need to take steps to boost domestic consumption demand and improve the investment climate in order to prevent a further slowdown in manufacturing growth.

Here are some of the steps that the government could take to boost domestic consumption demand and improve the investment climate:

● Increase public spending on infrastructure projects.
● Provide tax breaks and other incentives to businesses to invest in the country.
● Raise the minimum wage to boost the purchasing power of low-income households.
● Reduce interest rates to make it cheaper for businesses to borrow money.
● Promote exports by providing subsidies and other assistance to exporters.

The government will need to take a comprehensive approach to boosting domestic consumption demand and improving the investment climate in order to prevent a further slowdown in manufacturing growth.

The slowdown in manufacturing growth was mainly due to slowing global demand and inventory glut. Economists are concerned about the slowdown in manufacturing growth and have said that domestic consumption demand will be crucial going forward. The government will need to take steps to boost domestic consumption demand and improve the investment climate in order to prevent a further slowdown in manufacturing growth.