Industrial output contracts 1.6 percent in May

India's industrial production declined 1.6 percent in May, due to sharp drop in manufacturing and mining output, government data showed Friday, dampening hopes for revival in economic growth.

This was the worst performance of industrial production in 11 months.

The factory output measured in terms of the Index of Industrial Production (IIP) has registered a cumulative growth of 0.1 percent in the first two months of the current financial year, according to data released by the Central Statistics Office (CSO).

Manufacturing production that constitutes more than 75 percent of the IIP index, contracted by 2 percent during the month under review.

Mining output slumped by 5.7 percent. However, electricity sector registered a growth of 6.2 percent.

Eleven out of the 22 industry groups in the manufacturing sector showed negative growth.

"The Indian industry has slipped into a serious crisis with half of the 22 groups in the manufacturing sector showing negative growth and several of them posting a big drop in production," said Rajkumar N Dhoot, president, Associated Chambers of Commerce and Industry (Assocham).

"If this situation is allowed to persist, it is feared that the industry may see large scale job losses. The precarious situation is well reflected in several passenger car and commercial vehicles halting production for weeks as they are not able to clear the inventory," Dhoot said.

The sharpest drop of 30 percent was in office, accounting and computing machinery, followed by 26.1 percent contraction in radio, TV and communication equipment and apparatus and 21 percent contraction in tobacco products.

The industries that registered positive growth included furniture which logged 18.7 percent growth, followed by 14.3 percent growth in wearing apparel, dressing and dyeing of fur and 10.5 percent growth in coke, refined petroleum products and nuclear fuel.

As per use-based classification, capital goods contracted 2.7 percent and basic goods witnessed a contraction of 0.4 percent. However, intermediate goods segment registered a growth of 1.5 percent.