Industrial production grew by just 1.8% year-on-year in December 2011 due to contraction in mining and capital goods sectors and a lower manufacturing sector growth.

Factory output growth, as measured by the Index of Industrial Production (IIP), was at 8.1% in December 2010.

Output of the manufacturing sector, which constitutes over 75% of the index, rose at a lower rate of 1.8% in December, compared to a growth of 8.7% in the same month of 2010,  according to the official data released today.

Besides, capital goods sector witnessed a contraction of 16.5%, against a growth of 20.2% in the same month in 2010.

Mining output too contracted by 3.7% in December, against 5.9% growth in the year ago period.

However, power generation witnessed a good growth of 9.1% in December 2011, compared to 5.9% in the year ago period.

During the month, 15 out of 22 industry groups witnessed a positive growth.

During the month output of basic goods went up by 4%, against 7.8% in the year ago period. However, intermediate goods witnessed a contraction of 2.8%, against 8.1% growth in December 2010.

During the April-December 2011, the IIP growth stood at 3.6%, against 8.3% in corresponding period a year ago.

Besides, the IIP figure for November, 2011, has been revised to 5.94% from the provisional estimates of 5.9%.
 
Commenting on the IIP figures, Planning Commission Deputy Chairman Montek Singh Ahluwalia said that the numbers are expected to bottom out in the third quarter and revive in the January-March period.

"I thought the third quarter would be a kind of bottoming out quarter. We have to see whether that really works out," he said.

Asked if the IIP numbers are likely to pick up in the subsequent months, he said, "I hope so".

During December 2011, consumer goods witnessed a 10% upswing, as against a low growth of 3.5% in the corresponding month of 2010.

Furthermore, consumer durables production increased by 5.3%, compared to a growth of 7.8% in December, 2010.

During the month under review, output of consumer non-durables also shoot up by 13.4%. The segment grew by a mere 0.6% in December 2010.

The lower industrial output growth in the month was on expected lines as the eight core industries had registered a muted growth of 3.1% growth in December, mainly due to slackening output of crude oil, steel and natural gas. The core sector grew by 6.3% in December 2010.

The eight industries together contribute 37.9% to the overall Index of Industrial Production (IIP).

Earlier this week, the Central Statistical Organisation (CSO) had estimated the Indian economy to grow at a slower pace of 6.9% in the current fiscal, against 8.4% in FY11.

The decline in IIP numbers, experts said, will make a good case for further rate cuts by the Reserve Bank. Last month it cut cash reserve ratio (CRR) by 50 basis points to 5.5%.