India’s Infrastructure Output Dropped in November
Manufacturing Struggles as Emerging Economies Enter 2016
November infrastructure output declined 1.3% on an annual basis
India’s infrastructure output accounts for about 38% of the Index of Industrial Production (IIP). According to the Office of the Economic Adviser to the Government of India, infrastructure output fell 1.3% in November 2015 on a YoY (year-over-year) basis, as compared to a rise of 3.2% in the previous month.
As a result, the WisdomTree India Earnings ETF (EPI) fell 0.20% in December. In 2015, EPI fell 11.1%. Among Indian ADRs (American depository receipts), ICICI Bank (IBN), and Wipro (WIT) fell 6.5% and 7.2%, respectively, in December.
Performance of eight core industries
The infrastructure output index measures the performance of eight core industries. The decline in infrastructure output in November was mainly led by decreases in the production of steel, cement, crude oil, and natural gas.
Steel production, which carries a weight of 6.7% in the index, fell by 8.4% in November 2015. Cement production fell by 1.8%, and crude oil and natural gas production by 3.3% and 3.9%, respectively, in November 2015.
Electricity generation, which holds a weight of 10.3% in the index, recorded no change in November. The steep slowdown in electricity generation weighed on infrastructure output in November.
Vedanta (VEDL) and Tata Motors (TTM) fell 5.3% and 4.6%, respectively, in December.
In November, fertilizer production rose 13.5%. Also, refinery products and coal production rose 2.5% and 3.5%, respectively, in November.
In India, manufacturing accounts for about 17.0% of the country’s GDP (gross domestic product) and is one of the major contributors to the expansion of the economy. To boost manufacturing activity and to encourage capital spending, the Reserve Bank of India reduced the benchmark repo rate by 1.3% in 2015. It currently stands at 6.8%. Also, Prime Minister Narendra Modi launched the Make in India initiative to encourage multinational and domestic companies to manufacture in India. This initiative is expected to revive the ailing manufacturing sector in India.
You may also be interested in reading Russian Manufacturing Contracts in December.
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