BAD NEWS! Industrial production slows to 2.4%

Industrial production growth rate slowed to 2.4 per cent in May, 2012 due to contraction in capital goods and mining output, coupled with poor show by manufacturing sector, indicating persistent slowdown that may prompt RBI to cut lending interest rate.

Growth in factory output, as measured by the Index of Industrial Production, was 6.2 per cent in May 2011, according to the official data released on Thursday.

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Meanwhile, the industrial growth rate for April, 2012 was revised to 0.9 per cent, from 0.1 per cent reported earlier.

For the first two months of the current fiscal, April-May, the industrial growth is sharply lower at 0.8 per cent, compared to 5.7 per cent in the year-ago period.

According to the data, the capital goods output declined 7.7 per cent in May, as against a growth of 6.2 per cent in the same month last year.

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Mining output contracted by 0.9 per cent in May, as against growth of 1.8 per cent in the same month a year ago.

The manufacturing sector which constitutes over 75 per cent of the index, did not perform well as it grew a meagre 2.5 per cent, as against 6.3 per cent in May 2011.

The slowdown in industrial production is likely to put pressure on the Reserve Bank to cut lending rates at its quarterly policy review on July 31.

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Consumer Durables production showed a faster growth rate of 9.3 per cent in May, as compared to 5.1 per cent in the same month last year.

The consumer non-durables segment output growth remained flat at 0.1 per cent in May, as against 9 per cent in the same month last year.

Power generation witnessed a slower growth of 5.9 per cent during May, compared to 10.3 per cent in the same month a year ago.

In all, 12 of the 22 industry groups in the manufacturing sector have shown positive growth during May as compared to the same month a year ago.

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The output of basic goods went up by just 4.1 per cent in May, as against 7.5 per cent in the same month last year.

The intermediate goods grew by 2.7 per cent as against a 0.1 per cent growth in May last year.

The overall consumer goods output growth also slowed to 4.3 per cent in May, compared to 7.2 per cent a year ago.

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The official statement further said that industry group 'Radio, TV and Communication Equipment and Apparatus' has shown the highest growth of 16.4 per cent, followed by 13.7 per cent in 'Machinery and Equipment', and 12.6 per cent growth in 'Fabricated metal products, except machinery and equipment'.

On the other hand, the industry group 'Electric Machinery and apparatus' has shown a negative growth of 28.6 per cent, followed by 14.9 per cent in 'Furniture; Manufacturing' and 6.8 per cent in 'Wearing apparel; dressing and dyeing of fur'.