Demonetisation Blues Coming To Haunt India As Factory Output Dips In March

Despite the new Index of Industrial Production (IIP) with revised base year of 2011-12 having been promulgated, the India’s factory output growth slowed to 2.7 per cent in March on the back of poor manufacturing performance which was released here under the aegis of government of India on Friday.

According to data released by the Ministry of Statistics and Programme Implementation, the IIP had recorded a growth of 5.5 per cent in March 2016, whereas it only grew by 1.9 per cent in February 2017.

The IIP base year has been changed to ensure that it remains more relevant in the years that it is operational, Chief Statistician of India T.C.A. Ananth said at a joint briefing with Department of Industrial Policy and Promotion (DIPP) Secretary Ramesh Abhishek.

“The objective is to converge more in line with the current consumption and production pattern of the country,” he said, adding that the DIPP and the Ministry Of Statistics and Programme Implementation coordinated closely for the change.

The March IIP data showed that electricity generation went up by 6.2 per cent, while mining rose by 9.7 per cent.

However, manufacturing output grew slower at 1.2 per cent from 1.4 per cent reported for February 2017.

On a full fiscal 2016-17 basis, the new series of IIP showed a growth of five per cent as manufacturing and mining activities rose.

The factory output, as per the IIP’s new base year, had increased by 3.4 per cent during 2015-16.

The factory output rose mainly on account of a 4.9 per cent increase in manufacturing.

Among the other two major sub-indices, electricity generation increased by 5.8 per cent while mining output was up by 5.3 per cent.

Further, the government released other macro-economic data — Wholesale Price Index (WPI) and Consumer Price Index (CPI) — which showed that inflation eased in April.

India’s annual rate of inflation based on wholesale prices decelerated last month to 3.85 per cent from 5.29 per cent reported for March, as prices of food, fuel and manufactured products eased, official data showed on Friday.

The data on annual rate of inflation based on WPI was calculated on a revised base year of 2011-12.

The annual rate of inflation in April last year had declined to (-)1.09 per cent.

Retail inflation based on CPI for April slowed to 2.99 per cent from 3.89 per cent for March.

The Consumer Food Price Index (CFPI) during the month under review plunged to 0.61 per cent, as compared to 2.01 per cent in March.

The Central Statistics Office (CSO) data revealed that the annual retail inflation for rural India was 3.02 per cent, while that for the urban centres was 3.03 per cent.

The Indian industry welcomed the new macro economic data points calculated based on the new base of 2011-12.

According to Chandrajit Banerjee, Director General, CII, IIP data calculated with the new base year would give a “more realistic coverage and be reflective of the market realities”.

Similarly, he pointed out that the release of new WPI data on the 2011-12 base, makes it more comparable with the CPI which has 2012 as the base.

Welcoming the base revision of IIP series, Pankaj Patel, President, Ficci said: “The new base year was highly desirable to have a more representative and contemporary assessment of the industrial growth”.

However, he observed: “Investment, particularly private investments remain sluggish as evident from the muted growth of the capital good sector which implies that public investment is going to be an important factor.”