India’s factory output slipped into a negative zone in June owing to a decline in the manufacturing sector, the Index of Industrial Production released by the government indicated on Friday. The national factory output hit a two-year low and contracted by 0.1%.

Fifteen out of 23 industry groups from the manufacturing sector reported negative growth in June this year, the official release said. The output had seen a 2.8% rise seen in the month of May.

The Index of Industrial Production maps the economic activity in the country and it is compiled through questionnaires sent to industries at the end of each month asking about their production data. The government recently changed the base year of the index from 2004-05 to 2011-12 and the methodology used to derive the final numbers.

However, economists believe that even after the new methodology the index is not a perfect representation of the actual activity in periods of low wholesale inflation. The latest IIP numbers clearly show lingering negative impact of demonetisation on the economy, Sunil Kumar Sinha, Principal Economist, India Ratings and Research wrote in a note on Friday.

“This clearly points towards the lingering impact of demonetisation on the industrial sector and demonstrates that impact of demonetisation has been far more severe than anticipated earlier. Not a good news for industrial sector in particular and in general for the economy,” Sinha wrote.