Factory output slips into negative zone

India’s industrial production shrank by 0.8 per cent in April due to a sharp contraction in output of capital goods and consumer non-durables. This is the first decline in industrial production (IIP) in three months.

The manufacturing sector, which is crucial for the government to generate jobs, shrank by three per cent in April. The capital goods, which indicates investment in the country, contracted by 25 per cent in April and consumers non-durable shrank by 10 per cent. However, power generation recorded a growth of 14.6 per cent as against a marginally decline of 0.5 per cent a year ago. The mining sector, showed some improvement recording a growth of 1.4 per cent as against a contraction of 0.6 per cent a year ago.

“The robust growth of the core sector industries and consumer dura-bles in April 2016 were inadequate to stave off the drag exerted by the sharp contraction in output of capital goods and consumer non-durab-les,” said Aditi Nayar, se-nior economist at ICRA.

She said that volume-based contraction in manufacturing output in five of the last six months is disheartening. “While the deep contraction in capital goods was driven by a few items, it nevertheless highlights that investment activity by the private sector re-mains feeble,” she said.

CARE Ratings said the industrial production in FY2016-17 is expected to pick up in coming mon-ths on the back of improved infrastructure spending by the government and improvement in the consumer goods segment.

Apex industrial chamber Ficci president Harshavardhan Neotia said that the growth in manufacturing may take some more time to pick up as the measures taken by the government in the last few months start yielding results.

“There is an unfinished agenda of the reforms which the present government is trying to address. The manufacturing sector growth is dependent on many other factors too like the overall demand scenario in the economy which needs to be further enc-ouraged,” he said.

Assocham said estimates of industrial production are a negative sign towards growth cycle of industrial activity in India since it has come into negative territory after it rose continuously for last two months.