India’s industrial output dives as inflation jumps

Dragged by poor manufacturing output, industrial production plunged to an over four-year low, contracting 3.2 percent in November, while retail inflation inched up in December, a set of data which RBI will consider in its monetary policy review next month.

Industrial output, as measured by the Index of Industrial Production (IIP), had in October expanded at a near-five-year-high rate of 9.8 per cent, but economists had warned this might turn out to be a statistical aberration, given a low base of the previous year. This is the worst such performance of the economic indicator since October 2011 when the IIP had contracted by about 4.7%. The segment had contracted 1.6 per cent in November 2014.

The growth rates in November 2015 over November 2014 were (-) 0.7 percent in Basic goods, (-) 24.4 percent in Capital goods and (-) 0.7 percent in Intermediate goods.

Overall, 17 out of the 22 industry groups in the manufacturing sector have shown negative growth during the month under review.

The production of consumer goods grew 1.3 per cent even on a favourable base. Consumer non-durable goods’ output declined 4.7% in November 2015 compared to 7% growth in same month a year ago.

Some other important items that have registered high positive growth include Gems and Jewellery (253.7%), Sugar Machinery (78.0%), Lubricating oil (66.5%), Wood Furniture (46.9%), PVC Pipes and Tubes (31.4%), Transformers (small) (30.2%), Polypropylene (including co-polymer) (30.1%) and Sugar (25.7%).

In the case of prices, as pulses continued to remain dear, the country’s annual retail inflation moved up further to 5.61 percent in December from 5.41 percent during the month before, the official data showed.

India’s consumer price inflation accelerated to 5.6 per cent in December, the Statistics Ministry said today, with prices rising at a faster pace than economists had expected. “The increase was primarily on account of an adverse base effect in the food category and a minor uptick in core inflation”. Eggs’ cost rose by 0.97 percent. The inflation percentage in December was higher in “clothing and footwear” at over 5 percent each, and “fuel and light” at 5.45 percent.

The IIP data revealed there was sharp decline in the manufacturing sector and as well as in capital goods.

“The fall in the manufacturing is because both the export and domestic demand. It also underlines the need for more measures to stimulate investments and deeper structural reforms” said Harshavardhan Neotia, president of FICCI, in a statement here.

The mining sector output grew by 2.3% in November 2015 against 4% growth in the same month a year ago.