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India's industrial output shrinks

Syed Shabir paints Christmas ornaments for European clients at a paper mache workshop as family friend Iritiza,6, watches on October 16, 2008 in Srinagar, Kashmir. Photograph: (Reuters)

Reuters New Delhi Jun 11, 2016, 06.54 AM (IST)
India's industrial output fell in April, facing its first contraction in three months, dragged down by a sharp plunge in production of capital goods and a contraction in consumer wares.

Production at factories, mines and utilities shrank 0.8 per cent from a year earlier, government data revealed. Capital goods output plunged about 25 per cent on year in April. The sector, a proxy for capital investments, has been falling since October. Consumer goods were not spared, hit by a 9.7 per cent annual contraction in production of non-durables items.

The fall comes unexpected if compared with a 0.5 per cent annual rise predicted by economists surveyed by Reuters and a revised 0.3 per cent year-on-year growth in March.

Industrial output figures have paled in significance since last year when New Delhi revamped the method it uses to calculate gross domestic product.

The new method takes into account gross value addition in goods and services, a departure from the old practice that factored in volume-based indicators such as industrial output.

That helps to explain why India's economy grew 7.6 per cent from a year earlier in the fiscal year to end-March despite the sluggish pace of expansion in industrial production which posted annual growth of 2.4 per cent in 2015/16.

The federal statistics office plans to revise and rebase the industrial production index in the next six months to better capture the changes taking place in the economy.
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