India’s factory output growth crashed to its slowest in 17 months in November 2018. The previous low was in June 2017. Manufacturing production shrank 0.4 per cent while electricity and mining output grew 5.1 per cent and 2.7 per cent respectively. Items that recorded the steepest contraction included television sets, bodies of trucks and trailers, and raw materials for drugs.

The Indian economy is headed for a slowdown in the second half of the year ending March 31. With the economy already recording a 7.6 per cent GDP growth in the first half of the current fiscal, this implies growth is likely to slow at around 6.8 per cent in the second half.

While the adverse base and post-festive season winding down of momentum along with fewer working days had been expected to lower index of industrial production (IIP) growth, the magnitude of the correction has been sharper than expected.

Tighter domestic financing conditions may also have played a part. Going forward, incrementally improving liquidity, normalization post festive-related disruptions and election-related spending could get growth supportive enabling higher prints versus today’s IIP number. However second half average growth will be lower than first half growth. GDP growth in the third and fourth quarters is expected to be well below seven per cent.