Manufacturing activity in Dec dips

Core industries grow 4.9% in Nov

The country’s manufacturing activity took a major hit and slipped into contraction mode in December. According to the Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI), which measures manufacturing activity, fell to 49.6 from 52.3 in November. A PMI reading below 50 indicates fall in output. It was the biggest month-on-month decline since November 2008, a period after the collapse of Lehman Brothers that triggered a global financial crisis.

“Companies saw new work and output dip for the first time in 2016. In turn, quantities of purchases were scaled back and employment lowered. Meanwhile, input costs increased at a quicker rate, whereas output charge inflation eased,” IHS Markit said in a release. It said cash shortages and lower workplace activity resulted in job losses and fall in purchases during December. The number is expected to have a bearing on November’s industrial production numbers that will be released later this month. Index of industrial production has already fallen 1.9% in October.

Demonetisation impact
Demonetisation move of November 8 and a cash crunch that followed has already crimped consumption and production levels in the economy. It is also expected to impact economic growth in the coming quarters. Though Finance Minister Arun Jaitley has said the growth would be impacted for one or two quarters, independent economists are of the view that it will take at least one year for the economy to look up.

Meanwhile, a healthy performance by sectors, including coal, steel and electricity, helped eight core industries register a growth of 4.9% in November 2016. The growth rate of eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity — was 0.6% in November 2015. It stood at 6.6% in October 2016.

The core sectors, which contribute 38% to the total industrial production, expanded 4.9% in April-November 2016 compared with 2.5% growth in the same period last financial year, according to data released by the commerce and industry ministry on Monday.

Coal, steel, electricity production jumped 6.4%, 5.6% and 10.2%, respectively. Refinery and cement output growth sat at 2% and 0.5%, respectively, in November 2016, against 1.7% and (-)1.7% in November 2015.