Industrial output falls by 0.8% in April

The Dollar Business Bureau

India’s industrial production declined by 0.8 percent in April, due to sharp reduction in capital goods output and manufacturing activities, leading to several requests for proactive steps by the government to improve demand. This is the first fall in three months.

Factory production had expanded by 3 percent in April 2015, in terms of Index of Industrial Production (IIP).

According to the IIP, production of capital goods, a measure of investment, fell drastically by 24.9 percent in April this year as compared to a growth of 5.5 percent in the same month in 2015.

A data released by The Central Statistics Office (CSO) on Friday showed that manufacturing, which comprises over 75 percent of the index, declined by 3.1 percent as against a growth of 3.9 percent in the month of April 2015.

Industrial output had contracted by 1.6 percent in January this year. The IIP had witnessed a growth of around 2 percent in February this year. The interim estimate of 0.1 percent growth in March was reviewed a little upward to 0.3 percent.

The recent estimates of industrial output are a negative indication towards growth of industrial activities in the country since it has fallen into the negative territory after it surged continuously for the last two months, thereby, highlighting uneven industrial growth, industry body ASSOCHAM said.

Considering that monsoon could be late it would have an impact on the rate cut by RBI. ASSOCHAM urged the government to urgently take pro-active measures to control the supply situation and support the industry to maintain its momentum of growth.

Devendra Kumar Pant, Chief Economist at India Ratings stated that government efforts to kick-start investment and enhance manufacturing activities will take more time

"Growth of investment could possibly increase any time soon, the central as well as state government with a share of 16 percent have limited capacity to push the investments," Pant said.

The IIP data highlighted lower demand for consumer goods as overall consumer goods production dropped by 1.2 percent in April as compared to a growth of 2.8 percent a year earlier.

The production of consumer non-durable sector has also declined 9.7 percent as compared to a growth of 3.7 percent last year.

However, the consumer durable segment witnessed an upward trend with a growth of 11.8 percent, an increase from 1.3 percent last year. Power generation sector increased by 14.6 percent in April this year as compared to a slight decline of 0.5 percent last year. Mining sector production expanded 1.4 percent in April this year against a decline of 0.6 percent a year earlier.