India’s industrial production contracted for the second month in a row in December reflecting the stress on an already slowing economy and indicating tough measures were needed to put economic growth back on track.
The factory output dropped to a negative of 0.6 per cent, aided by a manufacturing sector output declining 0.7 per cent, capital goods contracting 0.9 per cent and mining declining by 0.4 per cent, the latest official data showed.
Consumption, one of the key pillars of India’s economy, which supported economic growth until now, too declined under the pressure of inflation as reflected by the latest data. Consumer non-durables output declined 1.4 per cent, while consumer durables 8.2 per cent.
Industrial production has contracted in six of nine months this fiscal. Analysts said the fall in manufacturing, which accounts for over 75 per cent of industrial production and contributes about 15 per cent to the economy, indicates sustained industrial revival was nowhere around the corner.
The only ray of hope came from the electricity production, which showed a growth of 5.2 per cent.
Prime Minister's Economic Advisory Council C Rangarajan said there was a need to stimulate investments to get back to high growth path.
"Our investment rate has fallen but it is still growing at a rate of 30 to 32 per cent...We need to look at the fact that we have not been getting full benefits of the investments that we have put in. If we activate these investments, we can get higher growth," he said.
"The continued fall in intermediate and capital goods production indicates that the revival is a distant dream," industry chamber Assocham said reacting to the IIP data.
Ficci President Naina Lal Kidwai said that the data has "dimmed hope" for a recovery in manufacturing in the near future.
The bleak numbers of the macro economic indicator come on the back of last week’s officials estimates that India’s economic growth would hit a decade low of 5 per cent this fiscal, offsetting government’s hope that the economy was showing an upturn. The weak IIP figures might also keep the prospect for a policy rate cut by RBI in March uncertain.