Industrial output shrinks for second month in a row

The pace of contraction decelerated from 3.4% in Nov, the sharpest decline in four years

Industrial output fell for the second consecutive month, dipping 1.3 per cent in December, government data showed on Friday. The pace of contraction, though, decelerated from 3.4 per cent in November, the sharpest decline in four years.

The index of industrial production (IIP) had dipped for the first time in 13 months in November after rising 9.8 per cent in October. The IIP has gained 5.1 per cent on average in the third quarter.

The difference with growth captured in gross domestic product numbers was quite evident where industrial output climbed almost nine per cent in the third quarter after rising 6.3 per cent in the second quarter.

Cumulative industrial growth for April-December 2015 was 3.1 per cent, up from 2.6 per cent in the same period a year ago.

Manufacturing contracted 2.4 per cent in December after shrinking 4.7 per cent in November and rising 10.6 per cent in October. Factory production grew by 1.6 per cent in the third quarter on average.

Growth in mining climbed to 2.9 per cent in December from 2.9 per cent in the preceding month. Electricity generation increased by 3.2 per cent, up from 0.7 per cent in November.

Within manufacturing, the capital goods output declined 19.7 per cent in December, but slower that the 24.5 per cent fall in November. Consumer non-durables saw production decline by 3..2 per cent, less than the 5 per cent fall in November. Production of consumer durables grew 16.5 per cent in December against 12.5 per cent in November.

Of the top 22 products within manufacturing, 12 posted declines, down from 17 in November.

Radio, TV and communication equipment registered the highest growth at 1,082 per cent. Electrical machinery fell by the largest margin at 46.5 per cent. Growth in furniture also significantly slowed from 104 per cent to 16 per cent. Cable, rubber insulated, sponge iron and stainless/alloy steel contributed the most to the contraction in the index.

"The persisting contraction in industrial production in December 2015, despite a normalisation in the number of working days, as well as the fairly widespread contraction in the sub-groups of manufacturing, are sources of concern," said Aditi Nayar, senior economist with ICRA.

The Chennai floods in December could also have contributed to the December industrial production.