 "Industrial output contracts 3.2% in Nov")
The Index of Industrial Production (IIP) dipped for the first time in the past 13 months in November, after registering a five-year high rise of 9.8 per cent in October. Economists had warned then to treat it as a statistical aberration since the expansion was on a low base.
Notwithstanding this contraction, the cumulative industrial growth for April-November 2015 over the corresponding period of the previous year stands at 3.9 per cent, compared with the 2.5 per cent growth registered in the same period in 2014-15.
Part of the dip was on account of a shift in the festive calendar. “We had expected a sharp dip in the performance of the IIP in November, on account of the unfavourable base effect arising from a shift in the festive calendar, as well as the trends revealed by various lead indicators. Nevertheless, the contraction in output revealed by the initial estimates for the IIP for November 2015 is disappointing compared to our forecast of marginal growth (+0.2%),” said Aditi Nayar, senior economist at ICRA.
Among the sub-sectors, manufacturing, which constitutes three-fourths of the Index, fell 4.4 per cent in November after a staggering growth of 10.6 per cent in October.
However, over the entire April-November period of FY16, the sector grew at 3.9 per cent, up from 1.5 per cent in the year-ago period. Seventeen out of the top 22 products within the manufacturing sector showed negative growth, up from five in the previous month. This implies a complete reversal from October when the same number of products exhibited positive growth.
Among product categories, furniture continued to witness high growth at 102 per cent. Electrical machinery and apparatus on the other hand, fell by the largest margin at 46.5 per cent. Cable, rubber insulated, conductor, aluminium, passenger cars, and stainless/alloy steel contributed most to the contraction in the index.
Cable, rubber insulated and passenger cars had contributed the most to the contraction in the index in the previous month as well.
Growth in mining slowed to 2.3 per cent in November, down from 4.7 per in the previous month. Electricity generation rose by a paltry 0.7 per cent, down from the nine per cent growth seen in October. Cumulative growth of the sector over the April-November period is seen at 4.6 per cent.
On the use-based classification, capital goods, considered a proxy of investment demand, contracted sharply by 24.4 per cent. This contraction acted as the big drag on the performance of the index in November 2015.
Devendra Pant, chief economist at India Ratings & Research, said disparity in growth across use-based sectors shows industrial recovery is still uneven and investment revival will take time.
On the demand side, consumer non-durables also declined 4.7 per cent. It had grown 4.7 per cent in October. But, consumer durables continued to witness spectacular growth, rising by 12.5 per cent in November. This was on the back of a 42.2 per cent rise in October. However, Nayar contends this rise is largely due to “a favourable base related to a considerable contraction in November 2014”.
The outlook for December is not that brighter either. ICRA expects IIP to grow at a slower pace than last year largely due to floods in Tamil Nadu and the continuing sluggishness in rural demand and contracting exports.
