Worried over IIP nos, India Inc seeks rate cut by RBI

Expressing serious concern over contraction in industrial output in November, India Inc called for immediate policy interventions, including a rate cut by RBI, to prevent job losses and boost demand.

"The red marks on IIP are a matter of serious concern underscoring the need for immediate policy intervention by the RBI and the government. The RBI should cut interest rates while the government should take steps to boost demand in the public sector," Assocham President Rana Kapoor said.

"Our worry is that if the situation is not immediately arrested and reversed, there could be a severe impact on employment. A sharp reduction in demand would force companies to prune headcount to remain afloat," Kapoor said.

Terming the contraction in IIP as "extremely worrisome", CII Director General Chandrajit Banerjee said: "Much more needs to be done to revive investment. The government should ensure that projects getting cleared by the Cabinet Committee on Investment (CCI) are implemented on the ground."

"Government policies should be complemented with a shift towards an accommodative policy announcement by the RBI in its forthcoming monetary policy to revive investment and propel demand," he added.

RBI is scheduled to unveil the third quarter review of monetary policy on January 28. PHD Chamber of Commerce President Sharad Jaipuria called the IIP contraction as "disappointing". "The most worrying factor is significant slowdown in the manufacturing sector.

The signs of slowdown in the consumer goods segment are also appearing," he said. Dashing hopes of recovery, industrial production contracted by 2.1 per cent in November, the lowest in six months, mainly due to poor performance of manufacturing sector and lower output of consumer goods particularly white goods.

The manufacturing sector, which constitutes over 75 per cent of the index, declined by 3.5 per cent in November as against a contraction of 0.8 per cent a year ago.

Overall, the consumer goods output declined by 8.7 per cent in November compared to a contraction of 0.3 per cent in the same month in 2012.

In terms of industries, 10 of 22 industry groups in the manufacturing sector have shown negative growth in November. Factory output, as measured in terms of the Index of Industrial Production (IIP), had declined by one per cent in November 2012.

"Sequential negative growth in IIP in October and November 2013 is disturbing. Urgent measures and fresh thoughts are required to boost manufacturing, without which the jobs potential will remain depressed," Ficci President Sidharth Birla said.

According to data released by the government, industrial output for the April-November period in 2013 contracted by 0.2 per cent as compared to a growth of 0.9 per cent in the same period a year earlier.

"As manufacturing has an overwhelming bearing on India's exports, contraction in the industrial production in November is a major negative. If the trend is not reversed immediately, exports, particularly of the engineering goods may not be able to keep pace of growth," EEPC India Chairman Anupam Shah said.

The previous low in IIP was recorded at (-) 2.5 per cent in May 2013.