The effect of demonetization of Rs 500 and Rs 1000 notes could clearly be seen on industrial activity as output contracted to four-month low of 0.4% in December. The worst hit was the consumer durables segment, which came down by more than 10%, largely due to unavailability of cash among people. In November, the industrial output was 5.7 percent and at that time, it did not fully capture the impact of demonetization. However, the output figures for December clearly indicate the effect of demonetization.
Finance Minister Arun Jaitley also agreed that the industrial output has been affected by demonetization. However, he assured that demonetization was like a medicine and once it takes effect, it would start to show positive results. He said that industrial output will pick-up in the coming months and grow at a faster rate since now there will be increased transparency in transactions.
The industry segments that have reported reduction in output include consumer durables, fast moving consumer goods (FMCG) and capital goods segment. However, there are the ones that have registered growth such as power generation and mining. Overall, 17 segments from a total of 22 segments in the manufacturing sector have registered negative growth in December.