India: Industrial production drops for second consecutive month
February 12, 2013
In December, industrial production contracted 0.6% over the same month the previous year, according to the so-called quick estimate for the index of industrial production (IIP). The reading followed the revised 0.8% decline observed in November (previously reported: -0.1% year-on-year) and disappointed market analysts, who had expected industrial output would increase 0.8%.
The monthly drop was mainly the result of a deterioration in manufacturing production, which accounts for over three quarters of industrial output. On a use-based classification, the monthly drop was broad-based, but particularly sharp in the production of consumer goods as well as in capital goods.
As a result of the monthly reading, the trend continued its downward trajectory, with the annual average growth in industrial output falling from 1.1% in November to 0.8% in December.
The Indian government recently cut its growth projection for this fiscal year and now expects the economy to grow 5.0%, a result that would represent the slowest growth rate in a decade. In its report, the government stated that the provisional estimates are contingent upon the anticipated level of agricultural and industrial output as well as on the budget estimates and the performance of key sectors of the economy.
Author: Ricardo Aceves, Senior Economist