Index of Industrial Production in India plunges by 2.1 pct in November

Written by PTI | New Delhi | Updated: Jan 11 2014, 04:03am hrs
India industrial productionIndia's industrial production shrunk for the second straight month in November. (Reuters)
Dashing hopes of recovery by the Indian economy, Index of Industrial Production (IIP) contracted by 2.1 per cent in November, the lowest in six months, mainly due to poor performance of manufacturing sector and lower output of consumer goods particularly white goods.

Factory output, as measured in terms of the Index of Industrial Production, declined by one per cent in November 2012.

Meanwhile, contraction in IIP for October last year has been revised marginally to 1.57 per cent from the provisional estimate of 1.8 per cent dip in production.

The previous low in IIP was recorded at (-) 2.5 per cent in May, 2013.

According to data released by the government, industrial output for April-November period in 2013, too, contracted by 0.2 per cent as compared to a growth of 0.9 per cent in the same period of 2012-13.

The manufacturing sector, which constitutes over 75 per cent of the index, declined by 3.5 per cent in November as against a contraction of 0.8 per cent a year ago.

During April-November, the sector's output contracted 0.6 per cent compared to a growth of 0.9 per cent in same period in 2012.

Overall, the consumer goods output declined by 8.7 per cent in November compared to a contraction of 0.3 per cent in the same month in 2012.

During April-November, 2013, the consumer goods output contracted by 2.6 per cent compared to 3.6 per cent growth in the corresponding period in 2012.

The consumer durables segment contracted by 21.5 per cent in November as against a growth of 1.1 per cent in the same month in 2012.

During April-November, the segment declined by 12.6 per cent compared to a growth of 5.2 per cent the same period in 2012.

In terms of industries, 10 out of 22 industry groups in the manufacturing sector have shown negative growth during the month of November.

The growth in consumer non-durables sector was 2.5 per cent in November as against a contraction of 1.5 per cent in the same month in 2012. During April-November 2013, the segment's growth was 6.3 per cent compared to 2.3 per cent growth in the same period in 2012.

The mining sector, with a weight of about 14 per cent in IIP, grew by one per cent in November as against a dip of 5.5 per cent in the same month in 2012.

During April-November, the output shrank by 2.2 per cent as against a contraction of 1.6 per cent.

Power generation segment posted a growth of 6.3 per cent in the month under review compared to 2.4 per cent growth in the same month of 2012. Expansion in power generation was 5.4 per cent in April-November as compared to 4.4 per cent in the same period in 2012.

Capital goods production, a barometer of demand, showed a growth of 0.3 per cent in November 2013 compared to a contraction of 8.5 per cent in the same month a year ago. The segment declined by 0.1 per cent in April-November as against a sharp contraction of 11.3 per cent in the comparable period.

Intermediate goods segment expanded at a rate of 3.3 per cent in November compared to a contraction of 1.4 per cent in same month in 2012. During April-November, the segment grew by 2.7 per cent compared to 1.8 per cent growth in the eight month period in 2012.

The basic goods segment grew by 0.7 per cent in November compared to 1.1 per cent growth in same month in 2012. During April-November, the segment grew by 0.7 per cent as against 2.8 per cent growth in eight months period a year ago.

HIGHLIGHTS

* Numbers add to woes of ruling alliance seeking third term

* Trade deficit widens on waning exports growth

* Dampens hopes for rebound in Asia's third-largest economy

India's industrial output shrinks, trade gap widens

(Reuters) India's economic woes worsened on Friday with a surprise contraction in industrial production and a wider trade deficit, adding to troubles of the ruling alliance as it heads into a tough national election seeking a third term.

Production at factories, mines and utilities shrunk for the second straight month in November, by 2.1 percent, data from the Statistics Ministry showed, dragged down by a contraction in consumer goods output.

Analysts polled had predicted output to grow 1.0 percent.

"The November industrial production figures continue to show that the Indian industrial sector remains in recession, with clear evidence that domestic consumption remains weak," wrote Rajiv Biswas, Asia-Pacific chief economist at His.

Meanwhile, the trade deficit widened to $10.14 billion last month from $9.22 billion in November on waning exports growth, data from the Trade Ministry showed on Friday.

Merchandise exports rose 3.49 percent year-on-year to $26.35 billion, slowing down from a 5.86 percent pace in November.

The second successive fall in the output and slowing exports growth will likely dampen hopes for a rebound in Asia's third-largest economy that is struggling to come out of a situation that some analysts define as stagflationary.

For the past four quarters, economic growth has been stuck below 5 percent while prices are rising.

The ruling Congress party is desperately seeking a rebound to help win back voters in the election expected between April and May. Opposition prime ministerial candidate Narendra Modi has made the depressed economy a central plank of his campaign.

Strong exports along with a robust farm output were expected to usher in an economic revival, beginning in the October-December quarter.

The latest data may make investors more wary of committing fresh investments in an economy that recorded 9 percent annual expansion until two years back and was widely expected to be one of the main drivers of the global economic recovery.

Looming elections as well as lingering uncertainty over the future course of the U.S. Federal Reserve's monetary policy, which has flooded emerging markets including India with cheap money, have already turned many investors cautious.

The latest industrial data shows no departure from a torrid narrative of weak investments and flagging consumer demand.

The production of consumer goods, a proxy for consumer demand, fell an annual 8.7 percent in November. The sector has grown just once in last seven months.

Capital goods production, a barometer for investments in the economy, grew just 0.3 percent in November from a year earlier.