IIP shrinks 1.3% in December

Industrial production contracts by 1.3 per cent in December.

Industrial activity shrank 1.3 per cent in December 2015 for the second consecutive month with the capital goods sector taking the lead.

Consumer price inflation accelerated to 5.7 per cent in January. And the Index of Industrial Production for December 2015 stood at 183.4, which is 1.3 per cent lower than its level in December 2014. “The cumulative growth for the period April-December 2015 over the corresponding period of the previous year stands at 3.1 per cent,” according to a statement released by the Ministry of Statistics.

The contraction in the IIP in December comes after a 3.4 per cent drop in November 2015. The manufacturing sector contracted 2.44 per cent for the second straight month, while mining and electricity sectors grew 2.92 per cent and 3.15 per cent respectively in December.

The capital goods sector, by usage, contracted by 19.69 per cent in December. Consumer durables, however, maintained a strong growth showing, registering a growth of 16.49 per cent in December on the back of 12.5 per cent in November. Consumer non-durables contracted 3.2 per cent while intermediate good grew modestly, by 0.94 per cent in December.

“A second consecutive month of negative growth in factory output once again demonstrates that the industrial recovery is still uneven and fragile. Though a sustained growth in consumer durables for seventh consecutive month which came in at 16.5 per cent in December 2015 is a silver lining, a double digit decline in the capital sector growth for the second consecutive month is a dampener,” Sunil Kumar Sinha, Principal Economist, India Ratings & Research said.

“The Chennai floods were one major reason why the IIP is down again. But the contraction also lays bare the structural weaknesses. For instance, in the capital goods sector, there is an increase in imports of second hand goods from China. The government needs to look into it. Strong growth is seen only in certain pockets such as gems and jewellery, and therefore not broad-based,” Soumya Kanti Ghosh, Chief Economic Advisor, State Bank of India said.