IIP contracts 0.3 pc in December on manufacturing slump


New Delhi:┬áIndia’s industrial production growth turned negative in December, contracting by 0.3 per cent, mainly on account of a decline in manufacturing sector output, official data showed on Wednesday.

Factory output, as measured in terms of the Index of Industrial Production (IIP), had recorded a growth of 2.5 per cent in December 2018.

Industrial production growth had turned positive at 1.8 per cent in November last year after contracting for three consecutive months of August (-1.4 per cent), September (-4.6 per cent) and October (-4 per cent).

According to the National Statistical Office (NSO) data, the manufacturing sector output contracted by 1.2 per cent in December 2019 as against a growth 2.9 per cent in the same month last year.

Electricity generation also fell by 0.1 per cent as against a growth of 4.5 per cent in December 2018.

Mining sector output grew by 5.4 per cent in the month under review, compared to a contraction of 1 per cent in the year ago month.

IIP growth during April-December period of the current fiscal came in at 0.5 per cent, down from 4.7 per cent in the same period of 2018-19.

Data for the December month further revealed that production of capital goods, a barometer of investment, slumped by 18.2 per cent compared to a growth of 4.2 per cent in the corresponding month of the previous year.

As per use-based classification, the growth rates in December 2019 over December 2018 were 2.2 per cent for primary goods, 12.5 per cent for intermediate goods and (-) 2.6 per cent for infrastructure/construction goods.

Consumer durables and non-durables recorded growth of (-) 6.7 per cent and (-) 3.7 per cent respectively.

In terms of industries, 16 out of the 23 industry groups in the manufacturing sector have shown negative growth during December 2019 as compared to the corresponding month of the previous year.

Commenting on the IIP data, Rumki Majumdar, Economist, Deloitte India, said, “The contraction in the IIP in December raises concerns about the sustainability of the green shoots in industrial activities that were visible till last month. This does not bode well for the overall economy as global headwinds already pose significant challenges to overall industries.”

“The large outbreak of the coronavirus in China can adversely impact India as China is one of the largest trading partners. With several factories being closed down in China temporarily, the electronics and auto industry in India will likely be hit because of their dependence on Chinese imports of components and raw materials,” Majumdar added.