IIP shrinks 0.6%; CPI inflation hits 2-year low in Jan

Tags: News

Dismal Dec IIP data attributed to manufacturing sector slump

Showing no signs of recovery, industrial production declined for the third straight month in December, but some relief came on the inflation front with the consumer price index (CPI)-based inflation hitting a two-year low of 8.79 per cent in January.

Government data released on Wednesday showed the index of industrial output, or IIP, contracted 0.6 per cent in December 2013 over a negative base of December 2012, when industry output had contracted by 0.6 per cent. The dismal IIP data was attributed to sluggishness in the manufacturing sector. In November, IIP had shrunken by 1.3 per cent (as revised on Wednesday from a provisional estimate of 2.1 per cent dip) and in October by 1.6 per cent.

Industrial output for the April-December period has thus contracted by 0.1 per cent, compared with 0.7 per cent growth during the same period of 2012-13. The manufacturing sector, which constitutes 75 per cent of the index, declined by 1.6 per cent in December, compared with a 0.8 per cent contraction in the year-ago period. The manufacturing sector contracted throughout the year, showing 0.6 per cent contraction during the April-December period compared with a 0.6 per cent growth in the same period of 2012.

The retail inflation number for January held some promise, as it fell for the second consecutive month, easing to 8.79 per cent on a drop in food prices. This was the lowest level for CPI inflation since January 2012, when it had hit 7.65 per cent. Inflation as measured by the consumer price index (CPI) stood at 9.87 per cent in December and 11.16 per cent in November. It was in double digits in October too.

Official data on Wednesday showed inflation in the food and beverages segment was 9.9 per cent in January compared with 12.16 per cent in the previous month.

Vegetable prices rose 21.91 per cent in January on an annual basis, which was a slower pace compared with the 38.76 per cent jump recorded in the previous month. Fruit prices rose 15.6 per cent against 14.64 per cent in December. In January, pulses were dearer by 2.59 per cent, cereals by 11.42 per cent and milk products by 9.82 per cent. Protein-rich items such as eggs, meat and fish became dearer by 11.69 per cent. The rate of inflation in this segment was slightly higher at 12.64 per cent in December.

The data showed that the provisional inflation was 9.43 per cent for rural areas and 8.09 per cent for the urban belt in January. The wholesale price inflation data will be released on Friday. The Reserve Bank of India factors in both retail and wholesale price-based inflation while fixing money policy.

CII director general Chandrajit Banerjee said the negative IIP growth over the negative base of December 2012 was disappointing. “CII is especially concerned about the performance of the manufacturing sector, which continues to be in the red even as the output of the mining sector showed a muted growth rate during the month,” he said.

Consumer goods output declined by 5.3 per cent in December, compared with a 3.6 per cent contraction in the prior-year month. During April-December 2013, output of consumer goods contracted by 3 per cent, compared with a 2.7 per cent growth in the corresponding period of 2012-13.

The consumer durables segment contracted by 16.2 per cent in December against an 8.1 per cent decline in the same month in 2012. For the April-December period, the segment declined by 12.9 per cent compared with a 3.7 per cent growth in the same period in 2012.

Overall, eight of the 22 industry groups in the manufacturing sector showed negative growth in December. The growth in the consumer non-durables sector was 1.6 per cent in December against a 0.5 per cent contraction in the same month in 2012. This segment grew at 5.7 per cent during the April-December period, compared with a 1.8 per cent growth during the prior-year period.

The mining sector, with a weight of about 14 per cent in IIP, grew 0.4 per cent in December against a 3.1 per cent dip in the same month of 2012. During April-December, the output shrank by 1.8 per cent. Power generation grew 7.5 per cent in December last year, compared with 5.2 per cent growth in the same month of 2012. Expansion in power generation was 5.6 per cent in April-December compared with 4.6 per cent growth a year ago.

Production of capital goods, a barometer of demand, declined by 3 per cent in December 2013 compared with a 1.1 per cent contraction in the same month a year ago. The segment declined by 0.5 per cent during April-December against a sharp contraction of 10.1 per cent in the prior-year period.

The intermediate goods segment expanded at a rate of 4.5 per cent in December, compared with a 0.2 per cent contraction in the same month in 2012. During April-December, the segment grew by 3 per cent compared with a 1.6 per cent growth in the same nine months in 2012.

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