India's factory output shrinks in December

Moneycontrol bureauIndia’s factory output contracted 0.4 percent in December amid signs of faltering industrial activity because of demonetisation.Factory output measured by the index of industrial production (IIP) is the closest approximation for measuring economic activity in the country’s business landscape. India’s factory output grew by a surprisingly robust 5.7 percent in November, running contrary to retail sales data showing slide in household spending and muted corporate investment hit by an economy-wide cash-crunchThe opposition has been unsparing in its criticism about the government’s move to demonetise old Rs 500 and Rs 100 notes has forced many factories to cut down production, because of falling sales and low funds to pay wages in cash.Latest data shows that capital goods output, a metric to gauge capacity additions by companies, have contracted. It fell to -3 percent in December from 15 percent in November.The government has forecast that private final consumption expenditure (PFCE) during 2016-17 at constant 2011-12 prices—a scale to measure household spending—will be valued at Rs 67.13 lakh crore compared to last year’s Rs 63.01 lakh crore.Consumer spending as measured by PFCE will likely grow 6.54 percent in 2016-17 over last year, compared to 7.4 percent growth in 2015-16, signs that households have deferred spending to deal with the currency culling exercise.Electricity output was 6.3% in December, down from 8.9 percent in November. Mining sector output came in at 5.2 percent against 3.9 percent (MoM). Manufacturing sector output was at -2 percent against 5.5 percent (MoM).More to follow...