Latest data on industrial output has left India Inc worried as the official index showed a two percent drop in December, after a small recovery the previous month, indicating that a demand slowdown continued in the economy.
Data on the Index of Industrial Production (IIP) released on Thursday also showed that the index for manufacturing, that has the maximum weight, fell 2.5 percent, versus 8.6 percent in the similar month of previous fiscal.
Among other sectors, the index for electricity expanded one percent, while that for mining was up one percent.
The general index had expanded eight percent in December last fiscal, showed data released by the Central Statistical Organisation (CSO). It also revised downward the industrial growth for November to 1.7 percent from the estimated 2.4 percent earlier.
Industrial production had fallen for the first time in 15 years to 0.4 percent in October, against a growth of 12.2 percent in like month last year. Officials attributed the fall to a demand slowdown.
The use-base classification revealed that the indices for intermediate goods fell 8.5 percent, consumer durables 12.8 percent and consumer non-durables, while that for capital goods was up 4.2 percent.
In terms of industries, only seven out of 17 industry groups managed to show a positive growth in December 2008 as compared to the corresponding month of the previous year.
“Indicators are showing weakness across the board,” said Tushar Poddar of Goldman Sachs, a leading global consultancy, saying the decline of 2 percent was lower than their own expectation of a 0.5 percent slump.
The Associated Chambers of Commerce and Industry (Assocham) said in a statement that the latest figures clearly indicate that India Inc needs a comprehensive package to come out of the slump.
“Such a negative growth was never recorded in the recent past and a huge fiscal, excise and other duty concessions are immediately required to help industry fall back on growth momentum,” said Assocham president Sajjan Jindal.
“In the absence of handsome package, industry will have no other option but to downsize operation, hold back expansion and modification plans, restructure it drastically, and cut jobs.”