IIP falls 2.2% in June

May fall turns out to be even more; power generation flat; only rises in consumer non-durables & intermediates

Industrial production contracted for a second month in a row, by 2.2 per cent in June, against a two per cent decrease in the same month of 2012-13.

It was dragged down by flat electricity generation and falls in mining and manufacturing output, official data showed on Monday. Also, the industrial fall now stood at 2.8 per cent for May  against the earlier estimate of 1.6 per cent.

This does not augur well for larger gross domestic product (GDP) growth. In the first quarter of 2013-14, industrial production declined 1.1 per cent against a 0.2 per cent shrink in the same period of 2012-13, due to low demand and the Reserve Bank’s liquidity choking. GDP had grown 5.4 per cent in the first quarter (April-June) of 2012-13 and by a decadal low of five per cent in the entire financial year.

“It (IIP fall in June) is below expectations," said D K Joshi, chief economist, CRISIL. The market had expected at least one per cent growth in IIP for June. Thirteen of the 22 broad manufacturing categories showed a fall in June against 11 in May.

In fact, none of the broad sectors or segments could grow, except for consumer non-durables, whose production expanded by five per cent in June against a contraction of 0.5 per cent a year before, and a modest rise of 1.1 per cent in intermediate goods against 0.9 per cent a year earlier.

A shock came from electricity generation, flat against 8.8 per cent growth in June 2012. An indication came when core sector data, released last month showed electricity generation fell 1.2 per cent in June. By the time, IIP data comes, there is one more revision for the numbers.

Manufacturing output declined 2.2 per cent in June against 3.2 per cent in the same month last year. Mining woes continued as the sector plunged 4.1 per cent versus 1.1 per cent in the same period last year.

Together with electricity, what could bog future industrial production was the data on capital goods. Its production fell 6.6 per cent in June; it declined  27.7 per cent a year before. Capital goods production never rose in any month of this year’s first quarter, being minus 3.3 per cent against a 20.1 per cent fall in April-June of 2012-13.

Consumer durables plummeted 10.5 per cent in June; it had risen 9.1 per cent in the same month of last year. Like capital goods, these products also could not grow in any of the months of the first quarter, being down 12.6 per cent against an eight per cent rise a year before. Basic goods also slid 1.9 per cent in June; it increased 3.6   per cent a year before.