Factory output has shrunk for the first time in 21 months, deepening concerns about growth in the Indian economy that the Narendra Modi government refuses to acknowledge or share.

The Index for Industrial Production (IIP) fell by 0.1 per cent in March 2019, compared with a 5.3 per cent increase in the same month a year ago, according to government data released on Friday.

Both the capital goods and consumer goods output fell, suggesting the economy may be slowing down sharply.

The government clings to the belief that the Indian economy — which has been estimated to grow at a fairly pacy 7 per cent in 2018-19 according to the second advance estimate of the Central Statistics Office (CSO), put out on February 28 — will rebound next year. This estimate will be tested when the CSO comes out with its provisional estimate on May 31.

The IIP figures buttress the argument, based on high-frequency data from industry studies, that the Indian economy has started to lose steam and could sputter for the greater part of this fiscal year.

On an annualised basis, IIP growth slowed to a three-year low of 3.6 per cent in 2018-19, against 4.4 per cent in the previous fiscal.

Industrial production grew at 4.6 per cent and 3.3 per cent in 2016-17 and 2015-16, respectively.

Meanwhile, IIP growth for February 2019 has been revised downwards to 0.07 per cent from 0.1 per cent earlier.

The manufacturing sector, which constitutes 77.63 per cent of the IIP, contracted by 0.4 per cent in March, compared with a 5.7 per cent expansion in the year-ago month.

The capital goods output declined by 8.7 per cent in the month under review, against a 3.1 per cent contraction in March 2018.

The stress in these two sectors could amplify concerns about job creation, which has turned into a highly divisive issue during the general election currently under way.

Power sector growth slowed to 2.2 per cent in March, compared with 5.9 per cent a year ago. Mining sector growth also slid to 0.8 per cent in March, compared with a 3.1 per cent expansion a year ago.

The high-frequency data from industry show that housing, automobile sales and consumer staples businesses are wilting badly in the face of the slowdown.

“The earnings season has not panned out well going by the numbers of auto, consumer and private banks’ quarterly results. We have started to see signs of slowdown in the economy, going by management commentary of consumer companies. If the slowdown gains traction, there may be further earnings downgrades in more sectors,” said Sanjeev Zarbade of Kotak Securities.

But some economists believe that a fresh economic stimulus provided by the new government could propel the Indian economy out of the rut.

“Undoubtedly, there are headwinds and drags here. But if you take a more forward-looking perspective over the next three-four quarters, it’s not all gloom and doom,” said Madan Sabnavis, chief economist at Care Ratings, who believes the economic momentum would remain subdued for the next few months.