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Demonetisation Led to Lowest Manufacturing Activity in Five Years In December- March Period


The new IIP series (Index of Industrial Production) with base year revised to 2011-2012 hints at the lowest manufacturing activity in 5 years time in the period from December 2016 to March 2017. The new data which includes only the formal and organized sector entails that the main reason for such a setback is demonetization which bore its severe brunt on the sector. The unorganized sector that is left unaccounted for in the new IIP series data shall all the more be hit hard.

Demonetisation Led to Lowest Manufacturing Activity in Five Years

As per the data in the four months time starting December and ending March, the manufacturing activity was reported to the highest in 2012-13 period. Also, the average rate of growth of the manufacturing activity in the December 2016 to March 2017 declined to 1.6% in comparison to the growth of 4.9% in December 2015 to March 2016 period.

In contrast, as per the new base year, the IIP witnessed a growth rate of 5% in the financial year 2016-17, which is a remarkable increase of 2% in comparison to the last financial year. Officials of the Confederation of Indian Industry said "These signs of an upturn in IIP are encouraging, as it is indicative of stronger manufacturing activity based on consumption demand that was not getting reflected in the data captured in the earlier base of 2004-05."

Further as per the Industry lobby, the IIP growth rate is reflective of the rebound in the sector.

Still the recovery from the ill-effects of demonetization is slow with growth in IIP figures increasing at the rate of 3%, 1.4% and 1.2% in the months of January, February and March respectively this year.

Story first published: Monday, May 15, 2017, 12:49 [IST]
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