IIP shrinks 0.4% in Dec

A fallout of demonetisation, but activity to pick up ahead, says Jaitley

DEMONETISATION TOOK a toll on industrial activity as output contracted to four-month low of 0.4 per cent last December with consumer durables taking the worst hit, plummeting by over 10 per cent due to cash crunch.

The factory output had contracted 0.9 per cent in December 2015. The latest decline reflected deterioration in the manufacturing sector on account of cash crunch following the scrapping of the Rs 500/1,000 notes on November 8, 2016. The industrial output was 5.7 per cent in November and did not capture the impact of demonetisation.

Finance minister Arun Jaitley said the contraction in industrial production in December was due to fallout of demonetisation but expected a pick-up and greater expansion in the coming months.

“November and December (IIP figure) cannot be the representative of period of this year. This is the demonetisation period and compared to November, December was more challenging for the reason that in many areas old currency was allowed to operate. In December it had gone away,” he said.

Factory output measured in terms of Index of Industrial Production (IIP) in December declined on account of 2 per cent contraction in manufacturing sector, as against 1.9 per cent decline a year ago.

According to data released by the Central Statistics Office today, the previous low was a contraction of 0.7 per cent in August.

During the April-december period of the current fiscal, IIP growth remained almost flat at 0.3 per cent compared to 3.2 per cent growth in the nine month period of 2015-16. Output of consumer durables segment declined by 10.3 per cent during the month under review from robust growth of 16.6 per cent reflecting the impact of currency crunch.