Index of Industrial Production contracts 4.2% in October, retail inflation cools to 4.3% in November; rate cut clamour set to get shriller
Factory output as measured by the Index of Industrial Production (IIP) contracted 4.2% for the month of October, a three-year low, on account of a sharp decline in manufacturing, consumer and capital goods sectors.
Manufacturing, which constitutes 75% of the index, contracted 7.6% while capital goods fell 2.3%. However, mining and electricity sectors grew 5.2% and 13.3%, respectively.
The only bright spot in the data that was announced on Friday was retail inflation, which as measured by the Consumer Price Index (CPI), cooled to 4.3% in November from 5.52% in the preceding month.
The decline in CPI was led by drop in food price inflation, which fell to 3.1% in November as against 5.59% in the previous month.
According to estimates, the biggest decline was led by food, beverage and tobacco inflation, which constitute 50% of CPI.
While rural price inflation for November came in at 4.09% (5.52% in the previous month), urban inflation stood at 4.69% (5.55% in October).
D K Joshi, chief economist, Crisil, said, "It was a shock to see the IIP numbers, but they are sometimes volatile. But it shows that the growth in the economy is weak and needs be boosted with reforms. Food inflation was expected to come down as the price increases were pretty sharp the same time last year, and the government has also done its bit in releasing food grains softening prices."
The consumer goods output too contracted by 18.6% in October as against a decline in output at 5% logged a year ago.
Consumer non-durable goods output too contacted 4.3% in October, compared with 1.9% growth in same month last year. During April-October, the segment grew 1% compared with 6.8% growth in same period last fiscal.
The intermediate goods' output too declined by 3.1% in October, compared with 2.7% growth in the same month last year. However, the basic goods production grew 5.8% in the month under review compared to a decline of 0.4% in same month last fiscal.
Rupa Nitusure, chief economist with Bank of Baroda, said, "The industrial production figures were a surprise and the credit growth for banks are also slow. Food inflation was expected to dip with supply issues being taken care by the government.
According to the ministry of Statistics sixteen (16) out of the twenty two (22) industry groups in the manufacturing sector have shown negative growth during the month of October 2014 as compared to the corresponding month of the previous year.
The industry group 'Radio, TV and communication equipment & apparatus' showed the highest negative growth of (-) 70.2%, followed by (-) 31.6% in 'office, accounting & computing machinery' and (-) 24.7% in 'furniture manufacturing'. On the other hand, the industry group 'electrical machinery & apparatus' showed the highest positive growth of 10.5%, followed by 9.6% in 'wearing apparel; dressing and dyeing of fur' and 5.3% in'luggage, handbags, saddlery, harness & footwear; tanning and dressing of leather products'.
Like ninepins
-7.6% Manufacturing
-2.3% Cap goods
-18.6%-- Consumer goods
-4.3% consumer non-durable goods
-3.1%-- intermediate goods
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