Factory output declines for third month

The factory output, as measured by the Index of Industrial Production, declined 0.6 per cent in December, the third straight month and the fifth so far in the current fiscal of y-o-y erosion in index.

Whereas mining index was in the negative zone in all three quarters and manufacturing index was in the positive zone only in the second quarter, electricity generation, the basic infrastructure for the industry and the economy, remained firmly in the positive zone. This indicates that the industry, particularly manufacturing, has terribly underperformed not because of power constraint but in spite of power facilitator. With a decline in the first 9 months of fiscal 2013-14, after a static output in the corresponding period a year ago, it would appear that industrial production has been critically crippled by policy logjam, governance deficit and lacking project investment, all acting on demand side.

Cumulatively, mining declined 1.8 per cent during April-December, over a similar measure of erosion in the corresponding period a year ago. Coal production showed 1.2 per cent rise, a fifth of the pace a year ago. Crude petroleum oil declined as in the first 9 months of the last fiscal and natural gas production went deeper in red.

In manufacturing, 10 out of 22 industries were in red during April-December. Basic metals, fabricated metal products, machinery and equipment, office, accounting machinery, radio and TV, medical equipment, and motor vehicles and furniture, gem and jewellery etc. were in negative zone, though electrical machinery and equipment (24 per cent), commercial vehicles (5.9 per cent) and other non-metallic mineral products (1.4 per cent) could remain in the positive territory.

Wearing apparel (30 per cent) on the back of decent export growth and chemicals and chemical production (10 per cent) were among the other star performers in the decaying manufacturing sector. Petroleum refinery products expanded 2.1 per cent (29.5 per cent), cement 3.7 per cent (7.9 per cent), and alloy and non-alloy steel 4.2 per cent (2.9 per cent) and were among the core industries recording relatively good production feat.

Major products showing sharp decline during the current month included polythene bags including HDPE & LDPE bags [(-) 58.4 per cent], aluminium conductors [(-) 55.9 per cent], telephone instruments (including mobile phones and accessories) [(-) 39 per cent], boilers [(-) 38.9 per cent], earthmoving machinery [(-) 38.2 per cent], gems and jewellery [(-) 33.3 per cent], polyester chips [(-) 31.9 per cent], computers [(-) 25.9 per cent], wood furniture [(-) 25.7 per cent], and commercial vehicles [(-) 25.3 per cent].

The products showing sharp increase in production included vitamins (198.4 per cent), sugar machinery (78.8 per cent), rubber insulated cables (59.8 per cent), air-conditioners (room) (47.2 per cent), steel structures (38.5 per cent), leather garments (27.4 per cent), transformers (small) (26.7 per cent), stainless and alloy steel (25.0 per cent), and antibiotics and their preparations (20.1 per cent).

Among the use-based classification, capital goods index was in the negative zone in seven out of the nine months, though, because of a 16 per cent surge in July, the cumulative decline over April-December was contained at 0.5 per cent, much smaller than 10.1 per cent in the corresponding period in 2012-13.

The production index of consumer durables, somewhat akin to capital goods, has kept eroding since December 2012; cumulative decline during April-December was placed at 13 per cent. Consumer non-durables increased 5.7 per cent (1.8 per cent). Basic goods index increased 1.3 per cent and intermediate goods index 3 per cent during April-December.

Lack of details which were earlier available in data on DIPP related 268 industries cramp our efforts to delve further into causal factors behind the industry performance.