Industrial output belies growth hopes as IIP slips 0.6%

India's industrial production unexpectedly shrank for a second straight month in December, weighed down by weak investment and consumer demand.

The index of industrial production (IIP) contracted by 0.6 per cent in December 2012, much lower than analyst expectations of a 1.2 per cent growth, according to data released by the Central Statistical Office (CSO) today.

The IIP for November has also been revised downwards to negative 0.8 per cent from 0.1 per cent.

Manufacturing output - which forms the bulk of industrial production and contributes about 15 per cent to the gross domestic product (GDP) - fell 0.7 per cent in December from a year earlier.

Last week the CSO had deflated overall growth expectations further, estimating on preliminary data that the GDP growth for the fiscal ending next month would be a mere 5 per cent; lower than earlier estimates by the government and the Reserve Bank of India.

Manufacturing, which constitutes about 76 per cent of industrial production, fell 0.7 per cent in April-December from a year earlier. The same period in 2011 showed a growth of 4 per cent.

Mining output in December last year contracted by 4 per cent compared to a decline in production by 3.3 per cent in the same month in 2011.

In April-December, production in the sector declined by 1.9 per cent, against a contraction of 2.6 per cent in the year-ago period.