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Current Affairs

Industrial production growth contracts

Date: 13 December 2019 Tags: Reports & Indices

Issue

Industrial activity contracted for the third consecutive month in October by 3.8%, driven by a fall in activity across sectors, according to official data.

 

Background

The Index of Industrial Production (IIP) had contracted by 4.3% in September and 1.1% in August.

 

Details

  • Separate data showed that retail inflation had surged to a 40-month high of 5.54% in November, driven by rising food inflation.

  • Growth in the Consumer Price Index (CPI) accelerated in November for the fourth consecutive month. It stood at 4.62% in October.

  • This combination of contraction in industrial activity and rising inflation has led experts to fear that India is entering a phase of stagflation, a situation in which there is persistent high inflation combined with stagnant or declining demand.

  • Within the IIP, the mining sector shrunk by 8% in October compared with a contraction of 8.5% in the previous month.

  • The manufacturing sector, similarly, contracted for the third consecutive month in October, by 2.1%, compared with a contraction of 3.9% in the September.

  • The capital goods sector contracted for the twelfth consecutive month in October, by 21.9%, compared with a contraction of 20.7% in the previous month.

  • The infrastructure sector, too, saw continuing contraction, of 9.2% in October, compared with a contraction of 6.4% in the previous month.

  • Within the CPI, food inflation climbed to a historic high of 8.66% in November compared with 6.93% in October.

  • The fuel and light segment saw a contraction of 1.93% in prices in November, compared with a contraction of 2.02% in October.

Consumer Price Index (CPI)

  • The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

  • It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them.

  • It is usually calculated and reported by the Bureau of Economic Analysis and Statistics of a country on a monthly and annual basis.

Index of Industrial Production (IIP)

  • The Index of Industrial Production (IIP) is an index for India which details out the growth of various sectors in an economy such as mineral mining, electricity and manufacturing.

  • The all India IIP is a composite indicator that measures the short-term changes in the volume of production of a basket of industrial products during a given period with respect to that in a chosen base period.

  • It is compiled and published monthly by the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation six weeks after the reference month ends.