Industrial growth drops to 2.7 per cent

Finance minister admits decline may adversely impact economy

Industrial growth drops to 2.7 per cent

The alarming decline in the rate of industrial expansion, which has an impact on the economy’s overall growth, is primarily because of poor performance in the key manufacturing sector, especially in consumer non-durables. The decelaration in industrial growth, coupled with high inflation, forced Union Finance Minister Pranab Mukherjee to admit on Wednesday that the trend could have an adverse impact on the economy.

Worried that the projected overall growth of 8.5 per cent might likely slow down, Mukherjee indicated that the government would consider taking corrective measures to ensure that industrial production maintained a healthy growth rate in the coming months.
Though part of the deceleration in growth rate in November 2010 may be because of the high base effect of 11.3 per cent in the same month previous year, the finance minister refused to take it as a consolation.

The sudden fall in industrial expansion to 2.7 per cent – the slowest  growth rate since May 2009 – has occurred even though the Index of Industrial Production, which measures the pace of industrial growth, for October 2010 grew by an impressive 11.29 per cent.

However, cumulatively industrial growth during the first eight months of the current fiscal (April-November, 2010) stood at 9.5 per cent compared to 7.4 per cent in the corresponding period of the previous fiscal.

Analysts said if the decline in industrial growth continues in the coming months, especially when inflation is soaring, the overall economic growth could be adversely affected.

As data show, in November, manufacturing growth nosedived to 2.3 per cent compared to a high of 12.3 per cent a year ago. The consumer non-durables production declined by negative 6 per cent compared to a growth of 2.3 per cent in the same period a year ago.

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