Dashing hopes of recovery, industrial production contracted by 3.2 per cent in November -- the lowest level in over four years -- due to poor performance of manufacturing sector and a sharp decline in capital goods output.
The Index of Industrial Production (IPP) measuring factory output, grew at 5.2 per cent in November, 2014, as per the data released by the Central Statistics Office (CSO) on Tuesday. This is the worst performance since October 2011 when IIP had contracted by 4.7 per cent. The industrial production growth in October was slightly revised upwards to 9.9 per cent from provisional estimates of 9.8 per cent released last month.
The manufacturing sector, which constitutes over 75 per cent of the index, contracted by 4.4 per cent as against a growth of 4.7 per cent in the same month last year.
Seventeen out of 22 industry groups in the manufacturing segment showed negative growth during November 2015 compared to the corresponding month of the previous year. Capital goods output, which is a barometer of investment, contracted by 24.4 per cent in November 2015 compared to a growth of 7 per cent in same month of previous year. The electricity sector, which constitutes about 10 per cent of the index, also showed dismal performance as it grew by meagre 0.7 per cent in November 2015 compared to 10 per cent growth in same month a year ago.
The mining sector output grew by 2.3 per cent in November 2015 against 4 per cent growth in the same month a year ago. Overall consumer goods production grew at 1.3 per cent in November 2015 against contraction of 1.6 per cent in same month of 2014. Production of consumer durables goods grew by 12.5 per cent in November 2015 as against a contraction of 14.5 per cent in the same month a year ago. Consumer non-durable goods’ output declined 4.7 per cent in November 2015 compared to 7 per cent growth in same month a year ago. “The negative growth of General Index further worsens the prevailing levels of demand-supply imbalances in the country.
The significant shrinkage in the production of capital goods and consumer non-durables shows that industrial revival is going to be one of the major challenges in days to come,” Assocham Secretary General D S Rawat said. PHD Chambers of Commerce and Industry President Mahesh Gupta said, “Going ahead, efforts should be taken to enhance disposable income of households vis-a-vis simplification of taxation system and enhanced tax incentives to individuals and reduction in the interest rate scenario.”
In the April-November period, the industrial production grew at 3.9 per cent against 2.5 per cent growth in the same period of previous year.
Moreover, rising for the fifth straight month, retail inflation or CPI quickened to 5.61 per cent in December, mainly on costlier vegetables and cereals, limiting the headroom for the Reserve Bank to lower rate next month.
Food inflation too rose to 6.40 per cent during the month, government data released on Tuesday showed. Retail inflation measured by the consumer price index (CPI) was at 5.41 per cent in November 2015 and 4.28 per cent in December 2014.
Retail prices of cereals and products moved up by 2.12 per cent in December, from 1.7 per cent in November. The growth in prices in meat and fish stood out at 6.57 per cent as against 5.34 per cent in November while that of eggs was at 0.97 per cent, from 0.5 per cent in the previous month. The prices of protein-rich items such as meat, fish and eggs generally go up during the winter as demand spikes. However, seasonal fruits turned cheaper in December, with inflation print at 0.64 per cent although vegetables prices grew 4.63 per cent. Pulses continue to pose a big challenge for policymakers as the rate of price growth stood at 45.92 per cent, only marginally down from 46.08 per cent in November.
Retail inflation in the oil and fats category moved up to 7.06 per cent while that of fuel and light, it was 5.45 per cent. “We are not surprised as this is a very sticky consumer inflation, but is well within the RBI target of 6 per cent. Once the base effect comes into play, I see a downward trend in CPI and a very strong case for interest rates coming down,” Yes Bank CEO and MD Rana Kapoor told reporters here. The Reserve Bank keeps track of retail inflation to decide on its bi-monthly monetary policy. The next meet is due on February 2.
The apex bank has been targeting 6 per cent inflation target by January 2016.