India’s industrial output, measured by the index of industrial output or IIP, registered a growth of 1.8 per cent for December 2011, a slower than expected rate of 2.7 per cent, and lower than the 5.7 per cent expansion in November 2011.
The range of expectation, according to a NDTV Poll is between 0.5 per cent and 3.8 per cent.
According to data released on Friday, the mining sector registered negative growth of 3.7%, manufacturing was grew at 1.8% and electricity at 9.1% over the corresponding period in the previous year,
In November 2011, IIP came in at 5.9 per cent versus a -5.1 per cent contraction in the month of October.
Earlier data showed that core sector growth – comprising coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity -- slowed to 3.1 per cent in December 2011, from 6.3 per cent in the year-ago period.
Advance estimates for GDP growth released earlier this month also showed a slowing economy, with a projected growth of 6.9 per cent, down from the 8.4 per cent in the past two fiscals.
The industry has been calling for cuts in key interest rates, saying higher rates were stifling production and growth.
Industry bodies raised concerns over the fragile nature of the recovery in production and urged the Reserve Bank of India to reduce interest rates to revive investment in the country.
The central bank in January cut the cash reserve ratio (CRR) rate by 50 basis points. One basis point is a hundredth of a percentage point.
Finance minister Pranab Mukherjee has also promised pro-active steps to boost output.
Low industrial output means fewer jobs, poor corporate growth, weaker currency but lower prices. Output typically falls because businesses see slackening demand for goods and services, which forces them cut production and inventory, and holds back investment in expansion.
Some industries, however, have done well despite the slowdown. Fifteen of the 18 manufacturing industries that are considered for the Index showed positive growth ini December compared to the year-ago period.
Publishing, printing & reproduction of recorded media showed the most growth of 57.3 per cent, followed by 41.2 per cent in medical, precision & optical instruments, watches and clocks. Tobacco products also saw a 24.3 per cent growth.
Key industrial markers such as electrical machinery and apparatus has shown a negative growth of 48.8% followed by 7.4% in furniture; manufacturing and 6.4 per cent in machinery and equipment.
However, consumption hasn’t slowed substantially, with consumer durables and non-durables recording growth of 5.3 per cent and 13.4 per cent, respectively. Overall growth in consumer goods was 10 per cent.
INDUSTRIAL OUTPUT DISAPPOINTS
Sectoral Trends
December November
Manufacturing 1.8% 6.6%
Mining -3.7% -4.4%
Electricity 9.1% 14.6%
Capital Goods -16.5% -4.6%
Consumer Durables 5.3% 11.2%
Consumer Non Durables 13.4% 14.8%