New Delhi, Aug. 12: Industrial production contracted 2.2 per cent in June, adding to the miseries of a government that needs to bolster its performance before it squares up for a general election next year.
The factory output, measured in terms of the index of industrial production (IIP), had contracted 2 per cent in June last year. IIP for May this year has also been revised down to a contraction of 2.82 per cent from a provisional (-)1.6 per cent.
Poor show by the manufacturing, mining and power sectors and a decline in production of capital goods brought about the second consecutive monthly contraction in industrial production.
Manufacturing contracted 2.2 per cent compared with a 3.2 per cent drop a year earlier. Mining output declined 4.1 per cent in June compared with a dip of 1.1 per cent a year ago.
Power generation was flat in June compared with a growth of 8.8 per cent in the same month last year.
Chandrajit Banerjee, director-general of the CII, said, “It is a matter of great concern and does not bode well for early revival of industry. If we factor in the base effect, the performance of industry looks even more disheartening. What is discouraging is the sharp decline in the output of all sub-sectors of manufacturing, mining and electricity, which continue to be under stress owing to a spate of inhibiting factors such as high interest rates, flagging investments, policy bottlenecks and subdued demand conditions.”
The CII blamed the RBI’s tight monetary policy for depressing demand. “The negative growth of the capital goods sector and a sharp deceleration of consumer goods industry, especially consumer durables, also call for urgent remedial action to stop its further descent into the red,” Bannerjee said.
The output of capital goods contracted 6.6 per cent in June against a decline of 27.7 per cent a year earlier. Consumer goods output contracted 2.3 per cent in June compared with an expansion of 3.7 per cent in the same month last year.
During April-June this year, factory output has contracted 1.1 per cent, down from a decline of 0.2 per cent in the same period last fiscal.
Retail inflation marginally declined to 9.64 per cent in July from 9.87 per cent in the preceding month as prices of cereal, pulses, fruits and sugar softened. Prices of cereal and pulses came down to 16.03 per cent (17.59 per cent) and 5.55 per cent (8.82 per cent), respectively in July. However, prices of vegetables and milk and milk products have risen in July.