New Delhi, Feb 10 (PTI) Demonetisation took a toll on industrial activity as output contracted to four-month low of 0.4 per cent last December with consumer durables taking the worst hit, plummeting by over 10 per cent due to cash crunch.

The factory output had contracted 0.9 per cent in December 2015.

The latest decline reflected deterioration in the manufacturing sector on account of cash crunch following the scrapping of the ₹ 500/1000 notes on November 8, 2016. The industrial output was 5.7 per cent in November and did not capture the impact of demonetisation.

Finance Minister Arun Jaitley said the contraction in industrial production in December was due to fallout of demonetisation but expected a pick-up and greater expansion in the coming months.

"November and December (IIP figure) cannot be the representative of period of this year. This is the demonetisation period and compared to November, December was more challenging for the reason that in many areas old currency was allowed to operate. In December it had gone away," he said.

Factory output measured in terms of Index of Industrial Production (IIP) in December declined on account of 2 per cent contraction in manufacturing sector, as against 1.9 per cent decline a year ago.

According to data released by the Central Statistics Office on Friday, the previous low was a contraction of 0.7 per cent in August.

During the April-December period of the current fiscal, IIP growth remained almost flat at 0.3 per cent compared to 3.2 per cent growth in the nine month period of 2015-16.

Output of consumer durables segment - TVs, refrigerators and washing machines - declined by 10.3 per cent during the month under review from robust growth of 16.6 per cent reflecting the impact of currency crunch.

The consumer non-durable mainly including FMCG items too contracted by 5 per cent in December, as against a contraction of 2.7 per cent year ago.

Overall consumer goods output showed a contraction of 6.8 per cent compared to growth of 3.2 per cent in December 2015.

Capital goods segment, barometer of investments, declined by 3 per cent as against 18.6 per cent decline in December 2015.

As per use-based classification, the growth rates are 5.3 per cent in basic goods and (-)1.2 per cent in intermediate goods.

However, the power generation showed a growth of 6.3 per cent in December compared to 3.2 per cent in the same month a year. The mining output also grew by 5.2 per cent in December compared to 2.8 per cent in the same month year ago.

Overall, 17 out of 22 industry groups in the manufacturing sector have shown negative growth in December.

Demonetisation impact on industrial production causes sectoral contraction and sharp declines in consumer goods output. Demonetisation led to a 0.4% contraction in December IIP driven by a 2% decline in manufacturing, with 17 of 22 manufacturing groups in negative growth. Consumer durables and non durables contracted, producing an overall fall in consumer goods, while capital goods declined. By use based classification, basic goods and power grew and mining expanded, but intermediate goods contracted. The release links the December weakening to the cash shortage after withdrawal of high denomination notes and notes that year to date IIP growth remained nearly flat.