Factory output at 10-month low to 0.4% in Dec 2021; Industrial output growth to be subdued on waning base effect ahead

14 Feb 2022 , 09:22 AM

The Quick Estimates of Index of Industrial Production (IIP) has touched a 10-month low in December 2021. IIP or factory output stood at 0.4% in the month under review on the back of contraction in manufacturing, capital goods and consumer durables output. Also, the unfavourable base effect dragged the output as well.

In December 2021, the indices of industrial production for the Mining, Manufacturing and Electricity sectors for the month of December 2021 stand at 120.3, 138.8 and 162.5 respectively. These Quick Estimates will undergo revision in subsequent releases as per the revision policy of IIP.

As per Use-based classification, the indices stand at 133.7 for Primary Goods, 91.4 for Capital Goods, 150.7 for Intermediate Goods and 153.5 for Infrastructure/ Construction Goods for the month of December 2021.  Further, the indices for Consumer durables and Consumer non-durables stand at 121.5 and 160.2 respectively for the month of December 2021.

In percentage terms, in December 2021, manufacturing activity contracts 0.1% compared to 0.9% of the previous month, while capital goods output declined at an 11-month low to 4.6% and Consumer durables dipped for a fourth straight month to 2.7%. On the contrary, mining output rose by a subdued 2.6%, while electricity output growth was at 2.8%, Intermediate and primary goods grew by 0.3% and 2.8% respectively.

The Quick Estimates for December 2021, the first revision for November 2021 and the final revision for September 2021 have been compiled at weighted response rates of 88 per cent, 92 per cent and 94 per cent respectively.

CARE Ratings in its research note said, “A broad-based weakening in momentum across segments, negative growth in manufacturing, capital goods, consumer goods segment and a relatively high base of last year (2.2% growth in December’20) have contributed to the disappointing industrial performance. Sequentially, industrial activity picked up by 7.4% during the month. However, a core sector that accounts for nearly 40% weightage in the IIP basket, recorded a year-on-year growth of 3.8% during the month. The weakness in industrial output is in line with the movement across the core sectors.”

In CareEdge View’s, “Normalisation of base and weakening momentum in the industrial activity has contributed to the sluggish IIP growth over the recent months. Both mining and infrastructure activities have witnessed a sequential improvement post extended monsoons, a further improvement in these segments could offer support to the industrial growth in the coming months. However, we expect the performance of the industrial sector to be subdued on waning base effect.”