Industrial production shrinks 0.3% in December

Casting a shadow on hopes of an economic revival, India’s index of industrial production (IIP) fell 0.3% in December 2019.

Also, retail inflation rose to 7.59% in January 2020, much higher than the Reserve Bank of India’s target of 4%. It was 7.35% in December 2019.

The situation is worrisome, because in the five months till December the index fell except in November when it grew 1.8%. In August IIP fell 1.4%, in September, 4.3%, and in October, 3.8%.

Data released by the National Statistical Office on February 12 shows that the output of the manufacturing sector—which constitutes 77.6% of IIP—declined 1.2% compared to the 2.9% rise a year ago. More worrisome is that output of 16 of the 23 industry groups which make up the manufacturing segment contracted in December.

Capital goods industry, a proxy for future investments in the economy, too contracted 18.2%; in November it had fallen 8.6%. Infrastructure and construction goods output too fell 2.6%; in November it had fallen 3.5%.

Even consumption demand is yet to take off. Output of consumer durable items contracted 6.7% in December compared to the 1.5% fall in November. Similarly, consumer non-durables too contacted 3.7% against a growth of 2% in the previous month.

Components of IIP like electricity generation also dipped by 0.1% as against a 4.5% growth in December 2018. However, the mining sector showed a 5.4% growth.

IIP for April-December of the current fiscal contracted 0.5%; in the year-ago period it had grown 4.7%.