IIP, CPI weak, India Inc bats for immediate policy measures

Worried over the industrial production contracting for the second consecutive month, India Inc is urging the government to take immediate policy measures to arrest the decline.

“The fall in manufacturing index is worrisome as it is spread across key sectors like capital goods. As the outlook for Indian economy looks positive, we are hopeful of sustained recovery in manufacturing in the next few months,” Ficci President Harshavardhan Neotia said.

Industrial production, measured in terms of index of industrial production (IIP), declined 1.3% in December, mostly due to weakness in manufacturing and capital goods.

“Negative growth in manufacturing and indifferent growth in mining have got wider implications and needs to be addressed on a priority basis.

Retail inflation, measured in terms of Consumer Price Index (or CPI) rose to a 16-month high in January, climbing to 5.69% n January compared with 5.61% in December. CPI stood at 5.19% in January last year.

The significant shrinkage in the production of capital goods shows that industrial revival is going to be one of the major challenges,” Assocham President Sunil Kanoria said.

Factory output in November too declined 3.4%, according to data released by Central Statistics Office (CSO).

The index had registered a growth of 3.6% in December 2014.

“Going ahead, we see the industrial growth remaining subdued for the rest of the fiscal, but believe that a possible revival in the rural economy could be beneficial for overall IIP,” Economist at Deloitte India Rishi Shah said.

During April-December this fiscal, the industrial output grew 3.1% compared with 2.6% a year ago.

The decline in December has been primarily because of a massive slump in output of capital goods, which showed a contraction of 19.7% in December as against a growth of 6.1% in the same month a year ago.

The manufacturing sector, which constitutes over 75% of the index, fell 2.4% compared with a growth of 4.1% in December 2014.