Poor start to fiscal year: IIP shrinks 0.8% on weak capital goods, manufacturing

The fall in industrial production was mainly on account of a 3.1 per cent drop in manufacturing output, which also has the maximum weight in the overall index.

By: ENS Economic Bureau | New Delhi | Updated: June 11, 2016 3:35 am
IIP, IIP rate, IIP india, Industrial output, Industrial production, Factory output, Factory production, The fall in industrial production was mainly on account of a 3.1 per cent drop in manufacturing output, which also has the maximum weight in the overall index.

After two consecutive months of growth, factory output in India faltered in April on account of a poor showing by the manufacturing and capital goods sectors.

Led by a 3.1 per cent contraction in manufacturing, the Index of Industrial Production (IIP) contracted 0.8 per cent in April, compared with a 0.1 per cent growth in the previous month, the data released by Central Statistics Office (CSO) showed. Factory output had expanded by 3 per cent in April last year. The dip in the manufacturing sector in April, which constitutes over 75 per cent of the index, comes after it had recorded a growth of 3.9 per cent in same month last year. Worrying still is that fact that the capital goods segment, a barometer of investment demand, contracted 24.9 per cent in April. After the latest data, the capital goods segment has now contracted for six consecutive months. Consumer durables expanded by 11.8 per cent.

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A dip in the production of consumer non-durables, or FMCG products, by 9.7 per cent pushed down the overall growth of consumer goods sector, which contracted by 1.2 per cent in April. The disappointing data for April may add to the clamour for rate cut by the Reserve Bank of India. The RBI had held to its policy rates in its monetary policy review on Tuesday, citing higher-than-anticipated upsurge in inflationary pressures. The IIP had declined by 1.6 per cent this January and then registered a growth of about 2 per cent in February this year. The provisional estimate of 0.1 per cent growth in March this year was revised slightly upwards to 0.3 per cent.

On the positive side, power generation recorded a growth of 14.6 per cent as against a dip of 0.5 per cent a year ago. The mining sector, showed some improvement recording a growth of 1.4 per cent as against a contraction of 0.6 per cent a year ago. Overall, 9 of the 22 industry groups in manufacturing sector showed negative growth in April 2016 as compared to year ago period. Analysts expect that above-normal rainfall projected by the Indian Meteorological Department after two years of deficient rainfall could boost rural demand while the implementation of the 7th Pay Commission report is likely to boost urban demand.

April Data may add to the clamour for a rate cut

* Led by a 3.1% contraction in manufacturing, the Index of Industrial Production contracted 0.8% in April, compared with a 0.1% growth in previous month
* The dip in manufacturing, which constitutes over 75% of the index, comes after it had recorded a growth of 3.9% in same month last year

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    Arun Shankar
    Jun 10, 2016 at 2:52 pm
    At the end of all the PR rhetoric, bhashans and the never ending bol-bacchan of Modi, this is the actual result on ground zero. What a sham!
    Reply
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      Arun Shankar
      Jun 10, 2016 at 2:54 pm
      Shashank, don' t be a blind supporter. Dr. MMS led the country even in difficult times, and even his critics will acknowledge that he did a good job. There was global recession, crude prices were quite high, and despite all that he did a commendable job. We cannot compare a man of Dr. MMS' stature with what Modi is. Modi is a sham! All his knowledge about economics can be confined to the back of a postal stamp. The guy doesn't even know English, forget Economics.
      Reply
      1. R
        Rahul.Gupta
        Jun 10, 2016 at 3:34 pm
        IE is a news paper and a Communist/Naxalite sympathetic news paper that is always against my beloved Shri Shri Shri Modiji's RAMrajya.
        Reply
        1. A
          Ashok
          Jun 10, 2016 at 6:52 pm
          Dollar bhi toot raha hai jai swamy ji
          Reply
          1. A
            Anandan
            Jun 10, 2016 at 3:08 pm
            This has happened because of the 60 years of misrule by the congress. This will change in the days to come as Modi is doing a frequent visit to US and other countries. And he is working more than 24 hours a day . He is sleeping in the plane and eating during the flights. So do not worry even the prices of toor dal will come down from 180 a KG to 8 a kg a nd urad dal from 200 to 20. Modi is working day and noght
            Reply
            1. A
              Anandan
              Jun 10, 2016 at 3:10 pm
              This has happened because of the 60 years of misrule by the congress. This will change in the days to come as Modi is doing a frequent visit to US and other countries. And he is working more than 24 hours a day . He is sleeping in the plane and eating during the flights. So do not worry even the prices of toor dal will come down from 180 a KG to 8 a kg a nd urad dal from 200 to 20. Modi is working day and noght
              Reply
              1. H
                harun
                Jun 10, 2016 at 3:07 pm
                Simple 7.9% GDP was a Delusion of geur. Fall in Industrial Out put is a reality. The day people in SSI get thrown out,reality will stare down those who saw 7.9% growth. Its just the way GDP is calculated by a new formula these days. Its just 2 years into Office and asking so much is unfair. But PM can stop harping and hyping everything.Its getting stale. To all Bhakts,agriculture is virtually dead,after no help to the farmer but promises. You wont have food on yr table as Re will crash and drive inflation.
                Reply
                1. H
                  harun
                  Jun 10, 2016 at 2:25 pm
                  The 7.9% was a dream and what we hear about Industrial output is a reality.lt;br/gt;lt;br/gt;So the jobs are nowhere in maufacturing,jai ho.lt;br/gt;lt;br/gt;So much for progress we are told every day.Jai ho.lt;br/gt;lt;br/gt;So were is the money coming from,to all its from the IT Sector which was created in 1989 by Modiji and today earns 118 billion dollars.lt;br/gt;lt;br/gt;In India Today Fake promises are lapped up like Milk but 118 billion dollars worth IT Industry were Modiji has nothing to do is worth 118 billion and it is the only saving grace among all the hypes.
                  Reply
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