Industrial output in December shrank 1.3 per cent while retail inflation in January edged up to a 16-month high, prompting the industry to call for urgent policy action in the forthcoming Budget to spur revival.
While factory output continued to fall primarily because of a decline in production of capital goods and manufactured products, retail inflation rose as a result of costlier food items.
Industrial production contracted 1.3 per cent in December, as against a decline of 3.4 per cent in November, according to data released by the Central Statistics Office (CSO).
The industrial activity had grown by 3.6 per cent in December 2014.
Complicating the matter, retail inflation as measured by the consumer price index (CPI) inched up to a 16-month high of 5.69 per cent in January compared with 5.61 per cent in December. It stood at 5.19 per cent in January 2015.
“As both high-frequency data show deterioration, the macroeconomic management of the economy by the government as well as RBI is going to be more difficult ahead, particularly when the Union Budget is due by the end of this month,” said Sunil Kumar Sinha, Principal Economist, India Ratings & Research.
Worried over the macro numbers, India Inc on Friday made a renewed call for policy initiatives in the upcoming Budget to push industrial growth.
“Estimates of industrial production for December 2015 mirrored the subdued industrial activity in the country and call for urgent policy remedies,” said Assocham President Sunil Kanoria.
The decline in December IIP has been primarily on account of a massive drop in output of capital goods, which contracted 19.7 per cent as against a growth of 6.1 per cent in the same month a year ago.
During April-December this fiscal, industrial output grew 3.1 per cent compared with 2.6 per cent a year ago.
The manufacturing sector, which accounts for over 75 per cent of IIP, declined 2.4 per cent against a growth of 4.1 per cent in December 2014.
However, mining showed some improvement, growing 2.9 per cent in the month as against a contraction of 1.7 per cent in same month a year ago. Power generation showed deceleration, growing at a clip of 3.2 per cent compared with 4.8 per cent in the same month a year ago.
As per the used-based classification, basic goods reported a marginal increase of 0.5 per cent as against 5.9 per cent in December 2014.