A decline in output of capital goods, manufacturing and consumer non-durables led to a contraction of industrial production for the third straight month by 1.5 per cent in January. The Index of Industrial Production had recorded a contraction of 1.2 per cent in December and a growth of 2.8 per cent in January last year, data released by Central Statistics Office showed. Capital goods output— an indicator of investment demand— contracted by 20.4 per cent in January as against a growth of 12.4 per cent a year ago. The manufacturing sector, which accounts for nearly 75 per cent of the industrial production index, recorded a fall of 2.8 per cent compared with 3.4 per cent growth in the same period a year ago. Consumer non-durables output contracted by 3.1 per cent in January, as against a rise of 0.3 per cent last year. [related-post] “The unabated contraction in industrial output for the third consecutive month poses concerns, particularly with the one-off factors that impacted production in November and December 2015 having dissipated,” ICRA’s senior economist Aditi Nayar said. “The waning of the favourable base effect pulled down the pace of growth of consumer durables in January 2016, from the double-digit levels recorded in Q3FY16. A persistence of this trend may weigh upon the IIP expansion in the remainder of the current fiscal,” she added. Consumer durables output, however, recorded a growth of 5.8 per cent as against a contraction of 5.7 per cent a year ago. The mining sector also showed an improvement, registering a growth of 1.2 per cent in January as against a contraction of 1.8 per cent in same month a year ago. In terms of industries, 10 out of the 22 industry groups showed negative growth during January. As per used based classification, basic goods reported a marginal increase of 1.8 per cent as against a growth of 4.8 last year. Calls for a rate cut by the Reserve Bank of India in its April monetary policy review are going to become stronger with the weaker-than-expected industrial output growth in January. Economists expect a rate cut by the central bank to spur investment and thereby, economic growth. With a flat industrial output growth rate so far in the current fiscal, economists are skeptical of the economy clocking a growth rate of 7.6 per cent as estimated by CSO in its advance estimate for 2015-16.
