Industrial output falls; dashes economic recovery hopes

Last Updated: Tue, Feb 12, 2013 15:08 hrs

New Delhi: India's industrial output shrank for the second consecutive month in December due to a sharp contraction in manufacturing and mining production, dashing hopes for economic recovery.

Output of factories, utilities and mines measured in terms of the Index of Industrial Production (IIP) declined by 0.6 percent in December, according to data released by the Central Statistical Office (CSO) Tuesday.

This is the second consecutive month of contraction in the industrial output. It had shrunk by 0.8 percent in November, after logging a growth of 8.2 percent in October.

The latest data dashes the hope of revival in the economic growth, which is at the weakest in a decade.

In the first half of the current financial year, Indian economy expanded by 5.4 percent. Last week, the CSO said that the gross domestic product (GDP) growth was likely to slump to 5 percent in the financial year ending March 31, 2013.

Top government officials, including Finance Minister P. Chidambaram had questioned the CSO estimate and expressed hope that GDP would expand by around 5.5 percent.

Chidambaram had said that the growth would revive in the second half of the year helped by the reform measures taken by the government.

However, the latest data is not in line with the government's expectations as it does not show any sign of recovery.

"IIP data for December 2012 has dimmed hope for a recovery in manufacturing in the near future. It is definitely a cause for serious concern as both consumer goods and investments have witnessed negative growth," said Naina Lal Kidwai, president, Federation of Indian Chambers of Commerce and Industry (FICCI)

"We feel that these disappointing figures certainly call for a high level committee under the Prime Minister to look into the issue of industrial slowdown and monitor its progress for the next few months," Kidwai said.

Poor show of manufacturing and mining sectors continue to be a big drag on the industrial output and overall economic growth numbers.

Manufacturing sector that contributes around 15 percent to the overall GDP, dropped output by 0.7 percent in December. Mining output dropped by 4 percent. However, electricity sector registered a growth of 5.2 percent in the month under review.

The cumulative growth of the core industries during April-December 2012-13 was 0.7 percent as compared to 3.7 percent growth registered during the corresponding period of the previous fiscal.

"The IIP figures for December are disappointing to say the least. With the exception of October 2012, there is a secular trend developing, which is most disconcerting," said Chandrajit Banerjee, director general, Confederation of Indian Industry (CII).

The cumulative figures about the manufacturing industry showed an increase of just 0.7 percent in April-December 2012, as compared to 4 percent growth registered in the same period last fiscal.

The electricity sector grew by 5.2 percent compared to 9.1 percent increase during the year-ago period.

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