New Delhi: Industrial production contracted for the second consecutive month, falling 2.1% in November, as manufacturing activity slumped, raising concerns of a prolonged slowdown. The latest data has raised a fresh dilemma for the Reserve Bank of India which is due to take a call on interest rates later this month.
While mining and electricity managed to stay in positive territory, a 3.5% decline in manufacturing output meant that the overall index of industrial production stayed in the red, latest data released by the Central Statistics Office on Friday showed.
What will come as a bigger worry is that compared to October 2013, production across factories and power utilities was lower in November, resulting in a month-on-month decline in IIP. "This reinforces the belief that fall in manufacturing growth has not yet bottomed out. Urgent measures and freshthoughts are required to boost manufacturing, without which the jobs potential here will remain depressed," Ficci president Sidharth Birla said in a statement.
Given the bleak forecast, even Yes Bank managing director and CEO Rana Kapoor said that a prolonged slowdown will adversely hit employment.
Economists do not expect industrial activity to pick up immediately. "The slowdown in the industrial sector is coming to an end, but we expect a prolonged bottoming out process as there are no visible triggers for an up-cycle at this stage. Even if industrial production growth rebounds back to positive in December, industrial production growth will be negative in Q4 of 2013, suggesting that GDP growth is likely to moderate in the fourth quarter after the rise in the third quarter, despite better agriculture growth," Nomura economists Sonal Varma and Aman Mohunta said in a note.
Ratings and research firm Crisil too predicted tepid growth in the remainder of 2013-14, citing infrastructure and input constraints and weak domestic demand.  |
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