India’s industry output slows to 7.1 per cent; capitals goods see robust performance

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India’s factory output expanded at 7.1 per cent in December, indicating a recovery momentum on the back of strong performance in the manufacturing and capital goods sectors.

However, the Index of Industrial Production (IIP) grew 3.7 per cent in April-December 2017, which is down from 5.1 per cent in the corresponding period a year ago. December’s number is also lower than the IIP growth for the previous month of November which was revised to 8.8 per cent from provisional estimates of 8.4 per cent released last month. The drop can be attributed to the decline in electricity and mining production.

Retail inflation was at a 17-month high of 5.21 per cent in December, and 3.17 per cent in January 2017, according to the CSO data. The IIP data for December, along with CPI for January, will be an important factor for the second advance estimates of GDP for 2017-18, which will be released in February-end. Robust performance of thwe manufacturing sector, which constitutes 77.63 per cent of the index, drove the index. It grew by 8.4 per cent during the month as compared to just 0.6 per cent in December 2016.

Also, 16 out of 23 industry groups in the manufacturing sector showed positive growth during December 2017 as compared to the previous year. Capital goods, including machines used in factories, are a good yardstick to judge real investment in the country. It saw a sharp rise with output increasing by 16.4 per cent in December 2017 compared to a decline of 6.2 per cent year ago.

Meanwhile, the consumer non-durables sector, rose 16.5 per cent against a contraction of 0.2 per cent last year. It recorded a growth of 0.9 per cent in December 2017. As per use-based classification, the growth rates in December 2017 over December 2016 are 3.7 percent in Primary goods, 6.2 per cent in Intermediate goods and 6.7 percent in Infrastructure/Construction Goods. The inflation data released by the Central Statistics Office (CSO) showed that the rate of price rise for consumer foods eased to 4.7 per cent in January, from 4.96 per cent in December. Inflation in the vegetable basket slowed to 26.97 per cent as against 29.13 in December.

Prices of fruits too rose at a lower pace of 6.24 per cent last month, as against 6.63 per cent recorded in the preceding month. For the fuel and light segment, inflation was 7.73 per cent last month compared to 7.90 per cent in December. “Spike in manufacturing growth in November 2017 was a catch up because of the muted volumes in the earlier months of financial year 2018,” said ICRA principal economist Aditi Nayar.

Source: BUSINESS TODAY