November IIP shrank on weak festive demand, low investment: Experts

PTI Posted online: Saturday, Jan 11, 2014 at 0000 hrs
Mumbai : Weak festive demand and sluggish investment activity led to a slump in factory production in November when the output contracted to a six-month low of 2.1 per cent, according to economists.

"Weak festive season demand for consumer durables, moderation in growth of merchandise exports in dollar terms, continuing issues for sugar and gems and jewellery and sluggish investment activity contributed to the weak industrial performance in November 2013," Aditi Nayar, Senior Economist at ICRA, said today.

Sharing similar views, India Ratings Director (Public Finance) Sunil Kumar Sinha said, "what is more disappointing is that it (IIP data) is so lacklustre despite a favourable base effect (November 2012: -1%) and festival demand."

The fall in index of industrial production (IIP) in November was sharper than October's decline of 1.6 per cent.

Despite a pick-up in core infrastructure industries such as mining and electricity, industrial production fell in November as the manufacturing sector contracted by 3.5 per cent compared to a year ago.

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

Nayar said, "The contraction in industrial production in October-November 2013 is worrying, highlighting that the boost to domestic demand following the kharif harvest is weaker than anticipated."

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

A few experts believe the factory output in rest of the fiscal is likely to better on increased rural spending.