Green shoots still out of sight; factory output shrinks 0.6%

Manufacturing, mining fail to look up in December; retail inflation at record high in January

Prolonging the wait for green shoots of recovery in the economy that policy makers were hoping for, the country’s industrial production contracted 0.6 per cent in December, dragged down by a dominating manufacturing sector and problems in the mining sector. This was the sixth monthly decline in the nine months so far this financial year.

Factory output, as reflected by the Index of Industrial Production (IIP), declined by a sharper 0.84 per cent in November than the earlier estimate of 0.1 per cent, official data showed today.

Also, another set of data released today showed that the Consumer Price Index-based inflation rate rose to a record 10.79 per cent in January, from 10.56 per cent the previous month, limiting the room for the Reserve Bank of India to ease its monetary stance.

As for industrial production, even as the pre-Diwali October yielded a robust 8.3 per cent growth, the following two months that witnessed contraction pulled the overall third-quarter growth down to 2.13 per cent. The cumulative April-December 2012-13 industrial growth stood at 0.7 per cent, compared with 3.7 per cent in the corresponding period the previous financial year. (Click here for graphics)

Manufacturing, with a weight of over 75 per cent on IIP, fell 0.7 per cent, against 2.8 per cent a year ago. In the first nine months of the current financial year, the sector grew just 0.7 per cent, against four per cent the previous year. The projection in the GDP data was that it would grow 1.9 per cent in 2012-13. So, to make the economy grow by even five per cent, much less than the 5.5 per cent the finance ministry was hoping, the sector would have to leapfrog in the fourth quarter, economists said.

 

 

“It is improbable the Central Statistics Office’s (CSO’s) growth estimate for the manufacturing sector would be met this year,” said Ficci Director Soumya Kanti Ghosh.

In December, within manufacturing, both consumer durables and non-durables declined, for the first time this year. Consumer goods output fell 4.2 per cent, with consumer durables contracting 8.2 per cent and non-durables 1.4 per cent.

After recovering in October, capital goods again fell in December, by 0.9 per cent. There, however, were sure signs of moderation in decline, bringing down the overall contraction in the first nine months of this financial year to 10.1 per cent.

Mining output, too, declined, by high four per cent, reflecting problems in segments such as coal and iron, economists said. Electricity generation expanded 5.2 per cent —less than 9.1 per cent in the same month last year. Economists said the electricity sector was also facing problems and, had capacity been fully utilised, the growth would have been higher.