Industrial production grows 0.4% in December

In December 2020, the IIP had risen by 2.2 per cent

India's industrial output growth fell to a 10-month low of 0.4 per cent in December on account of an unfavourable base of last year and Omicron related disruptions.

Factory output had grown 2.2 per cent in December 2020.

Contraction in capital goods as also both -- consumer durables and non-durables -- suggest that neither investment nor consumption has picked up pace and that policies need to be directed towards boosting consumption.

The government data showed while the manufacturing sector's output declined by 0.1 per cent, capital goods fell by 4.6 per cent and consumer durables contracted by 2.6 per cent. Consumer non-durables too slid by 0.6 per cent.

"Belying our expectation of a mild uptick, the YoY IIP growth crumbled to a marginal 0.4 per cent in December 2021, partly on account of an unfavourable base. The contraction in capital goods, consumer durables and consumer non-durables, along with a feeble growth in the remaining categories ranging from 0.3 per cent to 2.8 per cent in December 2021, adds heft to the MPC's decision to remain growth supportive in light of the incomplete recovery.

"Capital goods contracted in YoY terms, as well as relative to the pre-Covid level, highlighting the tentativeness in the investment cycle. In line with our expectation, the recent RBI release indicates a capacity utilisation of 68 per cent in Q2 FY2022, which we expect will improve to 71-72 per cent in the ongoing quarter despite the third wave, but not be enough to trigger a pickup in the private capex cycle," said Aditi Nayar, chief economist of ICRA.

On the positive side, the data showed the mining output has increased by 2.6 per cent and electricity by another 2.8 per cent.

During April-December of the current financial year, the industrial production grew 15.2 per cent against a 13.3 per cent decline in the same period last year.

Rajani Sinha, Chief Economist & National Director, Research, Knight Frank India said, "The IIP numbers are broadly in line with the slowdown that we have seen in some other high-frequency economic indicators for the last few months".

According to Nish Bhatt, CEO of investment firm Millwood Kane International, "For an economy to rise, it is important that the manufacturing sector perform. The manufacturing segment also helps create huge employment opportunities. Slowing industrial growth is concerning even as the government and the central bank have been ensuring ample liquidity for businesses and large industries".

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