Demonetisation impact: IIP contracts to 4-month low of 0.4% in Dec

Impacted by demonetisation, industrial production contracted to four-month low of 0.4% in December with consumer durables output plummeting by over 10% and an overall decline in manufacturing.

The decline in factory output comes over contraction of 0.9% in December 2015. It reflect deterioration in the manufacturing sector on account of cash crunch following scrapping of the Rs 500/1000 notes on November 8, 2016.

The industrial output was 5.7% in November and did not capture the impact of demonetisation.

Factory output measured in terms of Index of Industrial Production (IIP) in December declined on account of 2% contraction in manufacturing sector, as against 1.9% decline a year ago.

According to data released by the Central Statistics Office today, the previous low was a contraction of 0.7% in August.

During the April-December period of the current fiscal, IIP growth remained almost flat at 0.3% compared to 3.2% growth in the nine month period of 2015-16.

Output of consumer durables segment - TVs, refrigerators and washing machines - declined by 10.3% during the month under review from robust growth of 16.6% reflecting the impact of currency crunch.

The consumer non-durable mainly including FMCG items too contracted by 5% in December, as against a contraction of 2.7% year ago.

Overall consumer goods output showed a contraction of 6.8% compared to growth of 3.2% in December 2015.

Capital goods segment, barometer of investments, declined by 3% as against 18.6% decline in December 2015.

As per use-based classification, the growth rates are 5.3% in Basic goods and (-)1.2% in Intermediate goods.

However, the power generation showed a growth of 6.3% in December compared to 3.2% in the same month a year. The mining output also grew by 5.2% in December compared to 2.8% in the same month year ago.

Overall, 17 out of 22 industry groups in the manufacturing sector have shown negative growth in December.