India: Industrial production contracts unexpectedly
May 11, 2012
In March, industrial production contracted 3.5% over the same month last year, according to the so-called quick estimate for the index of industrial production (IIP). The reading contrasted both the 4.1% increase recorded in February as well as market expectations of a 1.7% rise. The contraction in March was primarily driven by a sharp decline in the manufacturing sector, which accounts for over three quarters of total industrial output. On a use-based classification, the monthly figure mainly reflected plummeting capital goods production as well as a fall in intermediate goods output. As a result of the monthly contraction, the trend in industrial production continues to point downwards, with annual average growth reaching 2.8% in the full fiscal year 2011/12, which is only a fraction of the 8.2% expansion recorded in the previous fiscal year. The government expects GDP to grow 7.6% this fiscal year, which will end on March 2013.