No demonetisation effect seen in November as IIP rises to 5.7%

Growth was driven up by a surge in capital goods production

Belying expectations of a slowdown due to demonetisation, industrial production in November grew by 5.7% compared to a contraction of 3.4% in the same month a year ago.

Factory output measured in terms of Index of Industrial Production (IIP) got a push in November 2016 due to better performance of manufacturing, mining and electricity sectors coupled with larger offtake of capital goods, considered a barometer of investment.

Following demonetisation of Rs 1,000 and Rs 500 notes announced on November 8, 2016, it was feared that cash crunch will hit all sectors.

According to data released by the Central Statistics Office today, IIP for the month of October last year was revised slightly upwards to a contraction of 1.8% from provisional estimates of (-) 1.9% released last month.

As per the data, IIP growth during April-November period this fiscal remained almost flat at 0.4% compared to 3.8% a year ago.

Manufacturing sector, which constitutes over 75% of the index, grew at 5.5% in November compared to a decline in output by 4.6% earlier.

However, during the April-November period the sector recorded a contraction of 0.3% compared to a growth of 3.9%.

Similarly, electricity generation grew at 8.9% in November compared to a meagre 0.7% a year ago. Mining output grew 3.9% in November compared to 1.7% same month a year ago.

Capital goods production increased by 15% in November compared to a decline in production by 24.4% earlier.

As per use-based classification, growth rates in November 2016 over November 2015 are 4.7% in basic goods and 2.7% in intermediate goods.

Consumer durables and consumer non-durables recorded growth of 9.8% and 2.9% respectively, with the overall growth in consumer goods being 5.6%.

In terms of industries, 16 out of 22 industry groups in the manufacturing sector have shown growth during the month of November 2016 as compared to the corresponding month of the previous year.