New Delhi: Industrial production re-entered the unfavourable territory by contracting 1.6 per cent in January, primarily on account of the decline in output of capital goods, manufacturing and mining sectors. The output of the manufacturing sector — which constitutes 77.6 per cent of the Index of Industrial Production (IIP) — shrank by 2 per cent in January, as towards a progress of 1.8 per cent throughout the identical month final fiscal, as per information launched by the federal government on Friday.
The worst efficiency was witnessed by the capital goods sector, which recorded a contraction of 9.6 per cent in the course of the month below assessment, in contrast to a 4.4 per cent decline a 12 months in the past.
A contraction of 3.7 per cent was registered in the mining sector in January, towards a constructive progress of 4.4 per cent in the year-ago interval.
Meanwhile, the National Statistical Office (NSO), which releases the IIP information, has revised upwardly the IIP quantity for December 2020 from an earlier estimate of 1 per cent to 1.56 per cent.
The manufacturing facility out was in unfavourable territory in November 2020. It had posted constructive progress throughout September and October 2020.
Aditi Nayar, Principal Economist, Icra, mentioned the slippage of client goods again right into a year-on-year de-growth in January 2021 is a key disappointment.
“We remain circumspect regarding the intensity of the rebound in consumption immediately after the vaccine rollout widens, as some categories of households may choose to rebuild the savings that they had drained during the lockdown and post-lockdown period,” she mentioned.
The IIP contracted by 12.2 throughout April-January as towards an nearly flat progress of 0.5 per cent seen in the identical interval final fiscal.
As per the information, there was a contraction of 0.2 per cent in the buyer durables section and 6.8 per cent in the buyer non-durable part. These two segments have been in contraction throughout January 2020 additionally.
Nayar mentioned the sharp worsening in the efficiency of capital goods in January 2021 was led by an adversarial base impact, which is predicted to be transient.
“While we expect the Central Government’s capital spending to display a quick pace in the fourth quarter FY2021, the outgo from state governments is likely to be mixed, and the spending of the private sector may remain muted in the near term,” she mentioned.
M Govinda Rao, Chief Economic Adviser, Brickwork Ratings, mentioned the contraction in IIP numbers for January comes as a bit of shock after turning constructive in December.
“The manufacturing sector continues to contract at 2 per cent shows that we still have some distance to cover before the economy recovers,” he mentioned.Â
