A surprise contraction in industrial output, fall in exports and jump in trade deficit during February announced by the government on Friday underscored the enormity of the economic challenges awaiting a new government set to take over in May.
Continuing demand slump in the capital and consumer goods sector contracted industrial production by a shocking 1.9 per cent in February after expanding 0.8 per cent last month. Worse than expected performance from manufacturing sector, which contributes close to 80 per cent in the index, led to decline in industrial output.
Manufacturing output declined 3.7 per cent in February from growth of 2.1 per cent in the same month a year ago. In the 11 months (April-February) to 2013-14, manufacturing contracted 0.7 per cent. This is the lowest level seen in manufacturing output since November 2011 — a 28-month low.
Production of capital goods, a barometer of demand, shrank 17.4 per cent on an annual basis, in sharp contrast to expansion of 9.1 per cent in the same month in 2012.
Consumer durables fell -9.3 per cent versus 8.3 per cent in January. Taken overall, 13 of the 22 industry groups in manufacturing showed negative growth in February as compared to the corresponding month of 2012.
India’s economic growth has almost halved to below 5 per cent in the past two years on weak investments and consumer demand, in the worst slowdown since the 1980s.
Electricity sector growth strengthened at 11.5 per cent versus 6.5 per cent and basic goods growth came in at 3.9 per cent versus 0.9 per cent.
Mining expanded 1.4 per cent in February as against a dip of 7.7 per a year earlier. In April-February, mining output shrank 1.1 per cent compared (2.3 per cent a year ago).
Industrial output for January was revised upward to growth of 0.8 per cent from a provisional estimate of 0.1 per cent, according to data from the Central Statistics Office (CSO). In February 2013, IIP recorded modest growth of 0.6 per cent.
Industry expressed disappointment on industrial output slipping back to negative territory with CII saying that the government should send out strong signals of renewed focus on growth.