Demonetisation impact: IIP contracts to 4-month low of 0.4% in December

New Delhi: Impacted by demonetisation, industrial production contracted to four-month low of 0.4 percent in December with consumer durables output plummeting by over 10 percent and an overall decline in manufacturing. The decline in factory output comes over contraction of 0.9 percent in December 2015. It reflect deterioration in the manufacturing sector on account of cash crunch following scrapping of the Rs 500/1000 notes on November 8, 2016. [caption id=“attachment_2808756” align=“alignleft” width=“380”]  Reuters[/caption] The industrial output was 5.7 percent in November and did not capture the impact of demonetisation. Factory output measured in terms of Index of Industrial Production (IIP) in December declined on account of 2 percent contraction in manufacturing sector, as against 1.9 percent decline a year ago. According to data released by the Central Statistics Office today, the previous low was a contraction of 0.7 percent in August. During the April-December period of the current fiscal, IIP growth remained almost flat at 0.3 percent compared to 3.2 percent growth in the nine month period of 2015-16. Output of consumer durables segment - TVs, refrigerators and washing machines - declined by 10.3 percent during the month under review from robust growth of 16.6 percent reflecting the impact of currency crunch. The consumer non-durable mainly including FMCG items too contracted by 5 percent in December, as against a contraction of 2.7 percent year ago. Overall consumer goods output showed a contraction of 6.8 percent compared to growth of 3.2 percent in December 2015. Capital goods segment, barometer of investments, declined by 3 percent as against 18.6 percent decline in December 2015. As per use-based classification, the growth rates are 5.3 percent in Basic goods and (-)1.2 percent in Intermediate goods. However, the power generation showed a growth of 6.3 percent in December compared to 3.2 percent in the same month a year. The mining output also grew by 5.2 percent in December compared to 2.8 percent in the same month year ago. Overall, 17 out of 22 industry groups in the manufacturing sector have shown negative growth in December.