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IIP growth: Factory output up 5.7%, fall in inflation

Meanwhile, the industrial production grew by 5.7 per cent in November against contraction of 3.4 per cent same month last year.

By: ENS Economic Bureau | New Delhi | Updated: January 13, 2017 5:23:24 am
inflation, inflation down, inflation news, industrial output, india inflation, consumer price inflation Food inflation was 1.37 percent last month, lower than a revised 2.03 percent in November.

The country’s industrial output shrugged off the impact of demonetisation to surge to a one-year high of 5.7 per cent in November as compared to a contraction of 1.8 per cent in the previous month, aided in part by a base effect alongside an uptick in manufacturing and electricity generation.

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In separate data issued by the statistics department, retail inflation decelerated to 3.41 per cent in December against 3.63 per cent a month ago with vegetable prices showing a slump.

The rise in the Index of Industrial Production (IIP) which was aided by a positive base effect, with industrial production having contracted 3.41 per cent during the same month a year ago. In November, manufacturing grew at 5.5 per cent against a contraction of 4.6 per cent a month ago, while growth in mining output and electricity generation also picked up to grow at 3.9 per cent and 8.9 per cent respectively.

Capital goods production, which has been a volatile contributory item for the IIP, surged by 15 per cent in November, helped by the low base. The capital goods segment had contracted 24.4 per cent in November 2015.

The cumulative IIP growth for April-November, the first eight months of this financial year, was a dismal 0.4 per cent as against a growth of 3.8 per cent seen in the corresponding period a year ago, as per the data released by the Central Statistics Office.

The manufacturing sector, which constitutes over 75 per cent of the index, recorded a contraction of 0.3 per cent as against a growth of 3.9 per cent in the same period last year. Electricity generation grew 8.9 per cent in November compared with 0.7 per cent a year ago, while mining output grew 3.9 per cent in November compared with 1.7 per cent in the same month a year ago.

Economists, however, did not brush off the impact of demonetisation on industrial output in the coming months. “The main impetus has come from two segments one of which has been a drag on industrial growth so far i.e. capital goods besides consumer goods. Both of them have shown remarkable growth thus boosting industry. While a negative base effect of -3.4% did help the cause (-24% in November for capital goods), the sharp increase in consumer durable goods does come as a surprise. While one would have to wait and watch for December to be certain of the neutral impact of demonetization, negative growth in IIP in December and January of FY16 would provide a similar statistical benefit for industrial growth. We still believe that it would be premature to conclude that demonetization did not have an impact as data on physical production numbers for auto and infra sectors do show lower production numbers for November when compared with October,” CARE Ratings said in a note.

As per use-based classification, industrial growth rates in November 2016 over November 2015 are 4.7 per cent in basic goods and 2.7 per cent in intermediate goods. Consumer durables and consumer non-durables recorded growth of 9.8 per cent and 2.9 per cent respectively, with the overall growth in consumer goods being 5.6 per cent. In terms of industries, 16 out of 22 industry groups in the manufacturing sector have shown growth during the month of November 2016 as compared to the corresponding month of the previous year.

During December, the Inflation rate of vegetables contracted 14.59 per cent as against a rise of 10.29 per cent in November, data released by the Ministry of Statistics and Implementation showed. Prices remained subdued for pulses category as well, with inflation for pulses in negative territory at 1.57 per cent as against 0.23 per cent inflation in November. The overall retail inflation rate based on Consumer Price Index (CPI) was recorded at 3.63 per cent in November 2016 and 5.61 per cent in December 2015.

Inflation rate for fruits, however, inched higher to 4.74 per cent in December from 4.60 per cent in November. Cereals and products inflation also registered an increase to 5.25 per cent during December from 4.86 per cent in November. Retail inflation rates for both rural and urban sectors recorded a decline in December, with rural retail inflation falling to 3.83 per cent during the month from 4.13 per cent in November. For urban sector, inflation rate was 2.90 per cent as against 3.05 per cent in the previous month.

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