India's factory output growth slows down to 7.1 percent in December

India's factory output growth slows down to 7.1 percent in December

The Index of Industrial Production (IIP) had grown at 2.4 per cent in December 2016, as per the data released today by the Central Statistics Office (CSO).

Cumulative growth of IIP for the period April-December 2017 over the corresponding period of the previous year stands at 3.7%.

Industrial output grew by 7.1 per cent in December, maintaining the recovery momentum, on the back of robust performance by manufacturing as well as higher off-take of capital goods and non-durable consumer goods.

The industry group "Manufacture of other transport equipment" showed the highest positive growth of 38.3 per cent followed by 33.6 per cent in "Manufacture of pharmaceuticals, medicinal chemical and botanical products" and 29.8 per cent in "Manufacture of computer, electronic and optical products".

"In our view, it remains somewhat premature to attribute the recent double-digit growth in capital goods to a pickup in investment activity, as it benefits from the rebuilding of inventories for sub-sectors such as commercial vehicles as well as a favourable base effect related to the 6.2 percent contraction in December 2016", Nayar said.

On the other hand, the industry group "Manufacture of tobacco products" has shown the highest negative growth of (-) 28.2 percent followed by (-) 22.3 percent in "Other manufacturing" and (-) 14.9 percent in "Manufacture of electrical equipment".

Construction goods jumped to 6.7 percent during December after growing in its fastest pace in almost five years at 13.5 percent in November aided by expansion in steel and cement output. They led the dominant item group of five that contributed positively to the overall IIP growth.

Digestive enzymes and antacids, which have a weight of just 0.22%, contributed 2.2520 percentage points to the growth, well ahead of cement with 2.16% weight which contributed 0.4127 percentage points and electricity which has a weight of 7.99% and contributed 0.4010 percentage points.

Dhananjay Sinha and Kruti Shah, analysts at Emkay Global, said, "We expect IIP growth, particularly from Consumer Durables side, to be reinvigorated to an average 5.5-6.5% in Q4FY18".

"Stewart Mackertich predicted IIP for December 2017 at 6.1% against prior period number of 8.40%".

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