India’s factory output falls, retail inflation inches up

Hopes of a revival in India’s manufacturing activity after a sharp spike in October were belied, with factory output actually registering a fall in the month after at a four-year low, according to official figures released on Tuesday.

To deal a further blow, the annual retail inflation also crept up to 5.61 percent in December.

According to data on index of industrial production (IIP) released by the Central Statistics Office, the country’s factory output declined by 3.19 percent in November, due mainly to a (-)4.4 percent drop in manufacturing activity.

The cumulative growth of the country’s factory output was also pulled down to 3.9 percent in the first eight months of the current fiscal year from 4.8 percent for the first seven months.

Between the other broader indices, electricity production was up marginally by 0.7 percent, while that for mining was at 2.3 percent.

The cumulative growth of the two indices for the first eight months of the current fiscal were 4.6 percent and 2.1 percent, respectively. Manufacturing’s cumulative growth stood at 3.9 percent.

In addition, the data revealed that among the six use-based classifications of the index, the output of consumer durables segment expanded by 12.5 percent in November. The consumer goods segment accelerated by 1.3 percent.

However, capital goods segment, which is a key indicator of economic activity plunged by (-)24.4 percent. The output of consumer non-durables was lower by (-)4.7 percent.

The basic and intermediate goods’ output inched-down by (-)0.7 percent each.

Overall, 17 out of the 22 industry groups in the manufacturing sector have shown negative growth during the month under review.

Segment-wise, growth was witnessed in ‘gems and jewellery’ (253.7 percent), ‘sugar machinery’ (78 percent), ‘lubricating oil’ (66.5 percent), ‘wood furniture’ (46.9 percent), ‘PVC pipes and tubes’ (31.4 percent) and ‘sugar’ (25.7 percent).

Moreover, high negative growth was reported in the ‘cable, rubber insulated’ (- 87.1 percent), ‘polythene bags’ (- 58 percent), ‘tractors’ (- 42.3 percent), ‘conductor, aluminium’ (- 36.8 percent), ‘rice’ (- 27.1 percent) and ‘three-wheelers’ (- 23.7 percent).

In the case of prices, as pulses continued to remain dear, the country’s annual retail inflation moved up further to 5.61 percent in December from 5.41 percent during the month before, the official data showed.

According to the numbers on the consumer price index, the annual rate of inflation, December-on-December, was distinctly higher in rural areas at 6.32 percent against 4.73 percent in the cities and towns.

The retail food inflation during the month under review was 6.4 percent for India as a whole, as against 6.07 percent in the month before. In the rural and urban areas, the annual inflation rates for food items were 6.41 percent and 6.31 percent, respectively.

The official data further showed that prices of pulses were up 45.92 percent over those prevailing during the past year. Cost of spices and vegetables edged-up by 10.83 percent and 4.63 percent on a year-on-year (YoY) basis.

Prices of meat products were up by 6.57 percent. Other protein based food items like milk and milk based products became expensive by 3.94 percent. Eggs’ cost rose by 0.97 percent.

Instead, in a worsening of the crisis for millers, retail inflation in sugar fell by (-)6.16 percent.

Similarly, cost of other categories under the general index rose during the month under review. The inflation percentage in December was higher in “clothing and footwear” at over 5 percent each, and “fuel and light” at 5.45 percent. Housing was costlier by 5.06 percent.

Among the states, the maximum inflation of 9.28 percent was reported from Andhra Pradesh, followed by 7.44 percent for Odisha, 7.21 percent for Karnataka, 6.81 percent for Chhattisgarh and 6.69 percent for Tamil Nadu.

The inflation levels for the Delhi region stood at 4.53 percent.

The latest macro-economic data provoked the concern of industry chambers.

“The steep fall in the manufacturing sector growth is because both the export and domestic demand, especially the rural demand have slowed down. It also underlines the need for more measures to stimulate investments and deeper structural reforms” said Harshavardhan Neotia, president of FICCI, in a statement here. “The slowdown in export may impact the growth of manufacturing,” he said. “The severe downfall in IIP numbers to -3.2 percent in November 2015 is a major worrying factor as the industry was expected to grow in a good growth trajectory, said Mahesh Gupta, president, PHD Chamber of Commerce and Industry, in a statement here.

“Slowdown in domestic demand is a major factor and government must take demand boosting measures to help industry growth to revive in the coming times’, he added.

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