Factory output growth contracted 2.1 per cent during November, the lowest in six-months, on account of continued weakness in consumption demand.
The industrial production data, released Friday by the government showed that the consumer durables production shrank a whopping 21.5 per cent in November while manufacturing, which has a weight of over 75 per cent in the index of industrial production (IIP), declined 3.5 per cent during the period, reflecting a grim economic scenario.
While experts said industrial growth is likely to remain muted during the current fiscal, India Inc expressed concerns over the IIP continuing to be in the negative territory, raising the clamour for a rate cut by the RBI in its monetary policy review on January 28.
“Consumer confidence is down, there is no job certainty as both the manufacturing and services sector are not doing well. The impact can be clearly seen in the auto demand. IIP is likely to be one per cent during 2013-14,” DK Joshi, chief economist, Crisil, said.
In a report, Crisil said that robust export growth with rising global demand may provide some cushion to manufacturing production. It added that even though the mining ban has been lifted in Karnataka, and project clearances are being fast-tracked, the impact of these measures will not be felt until 2014-15.
“The performance of the manufacturing sector is worrisome as it indicates that new investments are not happening,” Chandrajit Banerjee, director general, CII said. He added that the rebound in the US and Europe, a good monsoon and fast-tracking of projects would help the industrial production bounce back.
The IIP has remained in the negative zone for the second month in a row after dipping by 1.6 per cent in October 2013. The previous low in was recorded in May 2013 when it contracted 2.5 per cent. Factory output for April-November contracted by 0.2 per cent as compared to a growth of 0.9 per cent in the year-ago period.
Capital goods and intermediate goods showed a minor growth of 0.3 and 3.3 per cent in November as against
-8.5 per cent and -1.4 per cent during the year-ago period respectively. Electricity output rose 6.3 per cent as against 2.4 per cent in November 2012.