Industrial output slows to 2.7% in May 2015

13 Jul 2015 Evaluate

Coming as a big disappointment, the index for industrial output (IIP) for the month of May came in at 2.7%, lower than street expectation and also lower compared to downwardly revised 3.36% in April (earlier estimate of 4.1%). The decline in factory output was on the back of weakening growth in the manufacturing sector and mainly owed to poor performance from Consumer goods and Capital Goods.

The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of May 2015 stood at 128.8, 187.5 and 195.0 respectively, with the corresponding growth rates of 2.8%, 2.2% and 6.0%, as compared to May 2014. The cumulative growth in the three sectors during April-May 2015-16 over the corresponding period of 2014-15 stood at 1.5%, 3.2% and 2.8% respectively. In terms of industries, 12 out of the 22 industry groups (as per 2-digit NIC-2004) in the manufacturing sector showed positive growth during the month of May 2015, as compared to the corresponding month of the previous year.

The Quick Estimates of Index of Industrial Production (IIP) with base 2004-05 for the month of May 2015 released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation, for the month of May 2015 stood at 180.0, 2.7% higher, while the cumulative growth for the period April-May 2015-16 over the corresponding period of the previous year stood at 3.0%.

As per Use-based classification, the growth rates in May 2015 over May 2014 were 6.4% in Basic goods, 1.8% in Capital goods and 1.2% in Intermediate goods. The Consumer durables and Consumer non-durables recorded growth of -3.9% and -0.1% respectively, with the overall growth in Consumer goods being -1.6%.

The latest data of IIP highlights the negative consumer demand growth, as delayed and deficient monsoon rains last year, followed by unseasonal rains that damaged winter crops this year have hurt income and adversely impacted consumer demand in rural areas, now progress of the monsoon will be key to revival of rural demand, but the development can put pressure on Reserve Bank of India (RBI) to cut interest rates in the next bi-monthly monetary policy meet on August 4, 2015.

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