Growth was subdued due to contraction in mining and lacklustre manufacturing expansion.
The index of industrial production (IIP) grew at high of 7.3 per cent in December, 2017.
For the first nine months of the current financial year (April to December), IIP grew by 4.6 per cent, up from 3.7 per cent over the same period last year.
“The moderation in overall growth in industrial production for December 2018 is owing to a contraction in the mining sector and a slowdown in manufacturing activity amid a high-base effect,” noted CARE Ratings in a research note.
Manufacturing output grew by 2.7 per cent in December, after contracting by 0.6 per cent in November. Growth over the first three quarters of the current financial year stood at 4.7 per cent in FY19, up 3.8 per cent than last year.
“The high-base effect in the manufacturing sector has pulled down growth in the index heavyweight sector (77.6 per cent weightage). The manufacturing sector growth has slowed down to 2.7 per cent in December 2018, compared with 8.7 per cent in the corresponding month previous year,” noted CARE ratings.
Within the manufacturing sector, 13 of the 23 segments showed positive growth in December.
Manufacture of tobacco products showed highest positive growth of 27.9 per cent, followed by 17.9 per cent in the other transport equipment category and 16.5 per cent in wearing apparel.
On the other hand, the furniture segment contracted by 18.7 per cent, followed by other manufacturing and coke and refined petroleum products.
The mining sector contracted by 1 per cent in December, after growing by 2.7 per cent the month before. The mining index stood at 28-month low in December. Electricity generation rose by 4.4 per cent in December, marginally lower than 5.1 per cent in November.
Under the use-based classification, the capital goods segment, a proxy for investment activity, expanded by 5.9 per cent in December, after contracting by 3.1 per cent in November. Growth for the first nine months of the current financial year stood at 7.1 per cent, up from 2.7 per cent last year.
Separately, the consumer durables segment grew by 2.9 per cent in December, after contracting by 2.1 per cent the month before, while consumer non-durables, grew by 5.6 per cent after contracting by 0.6 per cent in November.
“For the reminder of the year, the growth in the industrial output would be tempered by the high-base effect. At the same time, favorable growth in output of consumer goods supported by higher demand (rural and urban) and the growth in capital goods and construction goods on the back of infrastructure growth could propel overall growth,” noted CARE ratings.