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LATEST NEWS UPDATES | New IIP series shows severe impact of demonetisation on manufacturing sector -Manas Chakravarty

New IIP series shows severe impact of demonetisation on manufacturing sector -Manas Chakravarty

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published Published on May 16, 2017   modified Modified on May 16, 2017
-Livemint.com

In the December-March of 2016-17 period, manufacturing growth was the lowest compared with the same period in the past five years, shows new IIP series

The new Index of Industrial Production (IIP) series, with the base revised to 2011-12, tells us that, in the period December-March of 2016-17, manufacturing growth was the lowest compared with the same period in the past five years.

This is very likely a result of the hit taken by the sector on account of demonetisation. The new IIP data does not include the informal sector; so the slowdown shown by the chart is in the organized sector. The informal sector would have been hit much harder.
 
Manufacturing sector growth
 
The chart shows the impact. The average rate of growth in the manufacturing sector in the 2011-12 series (year-on-year) during December 2016-March 2017 was 1.6%, compared with an average of 4.9% in December 2015-March 2016. The average rate of growth in the last four months of the fiscal year in 2014-15 was 3.2%; in 2013-14 it was 3.7% and in 2012-13 it was a very high 9.4%.

Why should we attribute the decline in manufacturing growth in recent months to demonetisation?

Because, if we take 2016-17 as a whole, manufacturing growth in terms of the new series was 4.9%, much higher than the growth of 3% in the previous fiscal. Which means growth in the first eight months of FY17 was much higher than in the corresponding period of FY16—the average year-on-year growth in the first eight months of FY17 was 6.6%, compared with 2.1% for the corresponding period of FY16.

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Livemint.com, 15 May, 2017, http://www.livemint.com/Money/oYE902Pvtv5ltCWe9P2WcI/New-IIP-series-shows-severe-impact-of-demonetisation-on-manu.html


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