Industrial production declines in April; first drop in 3 months

Industrial output contracted by 0.8 per cent in April, the first decline in three months, due to drastic fall in capital goods production and manufacturing activities, prompting demands for pro-active measures by the government to boost demand.

Factory output measured in terms of the Index of Industrial Production (IIP) had expanded by 3% in April last year.

As per the IIP, capital goods output, a barometer of investment, declined sharply by 24.9% in April as against a growth of 5.5% in the same month last year.
The Central Statistics Office (CSO) data released today revealed that manufacturing, which constitutes over 75% of the index, contracted by 3.1% in contrast to a growth of 3.9% in April last year.

Industrial production had declined by 1.6% in January this year.

The IIP had registered a growth of about 2% in February. The provisional estimate of 0.1% growth in March was revised slightly upwards to 0.3%.

Observing that delay in monsoon could limit room for a rate cut by RBI, industry body Assocham asked the government to urgently take pro-active steps to check the supply situation and help the industry maintain growth momentum.

Devendra Kumar Pant, chief economist, India Ratings opined that efforts of the government to kick-start investment and increase manufacturing base will take more time.

“Investment growth is unlikely to improve any time soon and government (center and states) with 16 per cent share has limited capacity to kick-start investment,” he said.

The IIP data showed lower demand as overall consumer goods output dipped by 1.2% in April as against a growth of 2.8% year ago.

The consumer non-durable segment output too declined 9.7% against a growth of 3.7% year ago.

On the other hand, the consumer durable sector showed an uptrend by recording a growth of 11.8%, up from 1.3% a year ago. Power generation expanded by 14.6% in April as against a marginal decline of 0.5% a year ago. Mining sector output grew by 1.4% in the month against a contraction of 0.6% a year ago.

Industry chamber Ficci said there is an unfinished agenda of the reforms which the present government is trying to address.

The manufacturing sector growth is dependent on many other factors too like the overall demand scenario in the economy which needs to be further encouraged, it said.

Overall, 9 of the 22 industry groups in manufacturing sector showed negative growth in April 2016.

Some important items that registered high negative growth during the month include ‘cable, rubber insulated’ (-) 96.2%, ‘aluminium foils’ (-) 66.3%, ‘sugar’ (-) 65.3% , and ‘heat exchangers’ (-) 65.3%.

Some important items showing high positive growth include aviation turbine fuel (102.5%), leather garments (40.1%), gems and jewellery (34.4%), telephone instruments including mobile phone and accessories (30.1%), and aerated waters and soft drinks (28.2%).