Economic woes continue as IIP contracts, export growth dips

New Delhi: Economic woes continue unabated, with the industrial production contracting by 2.1 per cent and export growth decelerating to six-month low of 3.49 per cent, raising clamour for rate cut by the Reserve Bank in its credit policy on January 28.

Measured in terms of movement of Index of Industrial Production (IIP), factory output also recorded its worst six-monthly performance in November, mainly due to poor performance of manufacturing sector and declining output of consumer goods particularly white goods.

As regard exports, the data showed marked deceleration in growth during December on account of fall in the shipment of petroleum goods. Worried over the declining growth, India Inc stepped up its demand for a rate cut by the RBI to boost industrial output.

The contraction of factory output by 2.1 per cent in November comes over a decline of 1 per cent during the same month corresponding year. It has remained in the negative zone for the second month in a row after dipping by 1.6 per cent in October 2013.

The previous low in IIP was recorded at (-) 2.5 per cent in May, 2013. As regards exports, it stood at USD 26.3 billion in December compared with USD 25.4 billion in the same month of 2012. Petroleum exports, which contribute significantly to the country's trade basket, declined 16 per cent, mainly on account of maintenance shutdown at Reliance plant.

Terming the decline in IIP as 'worrisome', CII urged the RBI to come out with accommodative monetary policy to should "to revive investment and propel demand, especially in consumer durables which are deep in the red."

According to data released by the government, industrial output for April-November period in 2013, too, contracted by 0.2 per cent as compared to a growth of 0.9 per cent in the same period of 2012-13.

The manufacturing sector, which constitutes over 75 per cent of the index, declined by 3.5 per cent in November as against a contraction of 0.8 per cent a year ago. During April-November, the sector's output contracted 0.6 per cent compared to 0.9 per cent in same period of 2012. The consumer durables segment contracted by 21.5 per cent in November.

In the first eight months of the fiscal, the segment declined by 12.6 per cent compared to a growth of 5.2 per cent the same period in 2012. On trade front, a 15.25 per cent decline in imports to USD 36.4 billion, particularly in gold and silver shipments, helped to narrow the trade deficit to USD 10.1 billion in December.

In November, the trade gap was USD 9.21 billion. Oil imports grew 1.1 per cent to USD 13.89 billion during the month. Commenting on the figures, Rafeeq Ahmed, President of the Federation of Indian Export Organisations, said efforts are required to keep export growth in double-digits.

During April-December, exports aggregated USD 230.3 billion and imports USD 340.3 billion, while the trade deficit was about USD 110 billion.

Next: Worried over IIP nos, India Inc seeks rate cut by RBI

Worried over IIP nos, India Inc seeks rate cut by RBI

New Delhi: Expressing serious concern over contraction in industrial output in November, India Inc called for immediate policy interventions, including a rate cut by RBI, to prevent job losses and boost demand.

"The red marks on IIP are a matter of serious concern underscoring the need for immediate policy intervention by the RBI and the government. The RBI should cut interest rates while the government should take steps to boost demand in the public sector," Assocham President Rana Kapoor said.

"Our worry is that if the situation is not immediately arrested and reversed, there could be a severe impact on employment. A sharp reduction in demand would force companies to prune headcount to remain afloat," Kapoor said.

Terming the contraction in IIP as "extremely worrisome", CII Director General Chandrajit Banerjee said: "Much more needs to be done to revive investment. The government should ensure that projects getting cleared by the Cabinet Committee on Investment (CCI) are implemented on the ground."

"Government policies should be complemented with a shift towards an accommodative policy announcement by the RBI in its forthcoming monetary policy to revive investment and propel demand," he added.

RBI is scheduled to unveil the third quarter review of monetary policy on January 28.

PHD Chamber of Commerce President Sharad Jaipuria called the IIP contraction as "disappointing". "The most worrying factor is significant slowdown in the manufacturing sector. The signs of slowdown in the consumer goods segment are also appearing," he said.

Dashing hopes of recovery, industrial production contracted by 2.1 per cent in November, the lowest in six months, mainly due to poor performance of manufacturing sector and lower output of consumer goods particularly white goods.

The manufacturing sector, which constitutes over 75 per cent of the index, declined by 3.5 per cent in November as against a contraction of 0.8 per cent a year ago.

Overall, the consumer goods output declined by 8.7 per cent in November compared to a contraction of 0.3 per cent in the same month in 2012.

In terms of industries, 10 of 22 industry groups in the manufacturing sector have shown negative growth in November.