Industrial growth declines by half to 4.4% in Sept

Industrial growth declines by half to 4.4% in Sept

All major segments witness a sharp dip

The data on Index of Industrial Production (IIP) showed that it declined the most in 16 months, reflecting a slowdown in demand across sectors, as interest rates rose in response to RBI’s tight monetary moves. The decline was all-round across most of the segments.

Analysis of latest industrial production data shows that the key manufacturing sector, that comprises almost 80 per cent of IIP witnessed a lower grate rate of 4.5 per cent in September against 8.3 per cent a year ago.

The capital goods sector, which of late has been witnessing impressive surge in growth recorded lower growth rate of 4.2 per cent during the same period. This sharp drop in growth rate of manufacturing and capital goods sector, has given rise to apprehension that if the decline continues in coming months the prospect of economy posting 8.5 per cent growth rate in the fiscal year 2010-11 may come under pressure.

Data shows electricity generation could grow by just 1.7 per cent in September as against 7.5 per cent last year. Reflecting distinct sign of slowdown in industrial activities mining output posted a lower growth rate of 5.2 per cent compared to 7.4 per cent corresponding period last year. Reacting to sharp fall in industrial growth rate Finance Minister Pranab Mukherjee said, “it is a matter of concern. We will have to analyse why this is happening.” However, cumulative figure of industrial production during April-September in this year shows that industrial growth in the first half of the fiscal has climbed up by standing at 10.2 per cent as against 6.3 per cent in the corresponding period last fiscal year.  The higher growth in the first half of this fiscal is primarily because of robust production figures for initial months.

It is now being expected that with the industrial growth rate coming down sharply in September along with declining inflation, the RBI, which till now has been pursuing tight monetary policy, may relax the monetary regime. FICCI Secretary General Amit Mitra said decline in manufacturing sector’s growth rate was on the expected lines as monetary tightening by RBI was going to moderate the growth of the sector.

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