India's industrial output contracts 0.6 percent in December

India's industrial output dropped by 0.6 percent in December, registering contraction for the third straight month due to a decline in manufacturing production, government data showed Wednesday.

The Index of Industrial Production (IIP) had declined by 2.1 percent in November.

According to data released by the Central Statistics Office (CSO), manufacturing production slumped by 1.6 percent from a decline of 0.8 percent in the corresponding period of 2012.

During the month under review, mining sector grew at a sluggish 0.4 percent from a decline of 3.1 percent in output during December 2012. Electricity output increased by 7.5 percent from a growth of 5.2 percent in the corresponding month of 2012.

Expressing disappointment over the monthly numbers, India Inc. called for interest rate cuts by Reserve Bank India (RBI).

Chandrajit Banerjee, director general of Confederation of Indian Industry (CII), said the negative growth of 0.6 percent, for the third consecutive month, over the negative base of December 2012 continues to disappoint.

Banerjee said CII is especially concerned about the performance of the manufacturing sector, which continues to be in the red even as mining output shows muted growth rates during the month.

"Similarly, the negative growth of the capital goods and the consumer durables sector reinforces the view that the escalating interest costs are adversely impacting investment decisions in the respective sectors," he said.

Secretary general of the industry body FICCI A. Didar Singh said: "While the negative growth in manufacturing is certainly disappointing but we hope that growth has bottomed out."

"Some of the measures taken by the government in the past are likely to yield results in coming months. A couple of large projects facilitated for clearance through cabinet committee are now in initial stages of implementation and are expected to stimulate economic activity," Singh said.

Segment-wise growth was witnessed in sugar machinery (78.8 percent), ayurvedic medicaments (62.7 percent), steel structures (38.5 percent), cable, rubber insulated (59.8 percent), air conditioners (47.2 percent), leather garments (27.4 percent), stainless steel (25 percent) and transformers (26.7 percent).

Segment-wise, high negative growth was reported in computers (-25.9 percent), aluminium conductor(-55.9 percent), earth moving machinery (38.2 percent), commercial vehicles (25.3 percent), gems and jewellery (-33.3 percent) and telephone instruments including mobile phones and accessories(-38.9 percent).