Factory output in December sputters, grows at just 0.4%

The overall output was dragged down by manufacturing as it contracted by 0.1 per cent. Electricity and mining output grew by 2.8 and 2.6 per cent respectively.

Weakness in consumer durables shows that the economy, which was on the recovery path, has not been able to fully reach its potential due to faltering private consumption.

Consumer durables output contracted by 2.7 per cent in December.

The capital goods output also contracted indicating that the investments by private sector took a hit during the month. It shrank by 4.6 per cent in December.

“Belying our expectation of a mild uptick, the YoY IIP growth crumbled to a marginal 0.4% in December 2021, partly on account of an unfavourable base. The contraction in capital goods, consumer durables and consumer non-durables, along with a feeble growth in the remaining categories ranging from 0.3% to 2.8% in December 2021, add heft to the MPC’s decision to remain growth supportive in light of the incomplete recovery,” said Aditi Nayar, chief economist, ICRA.

The output grew by 15.2 per cent in the period April-December aided mostly by a low-base effect.

Core sector, which contributes 40 per cent to the IIP index, had gone up by 3.8 per cent in December.