Slowdown: India's industrial growth falls

Continuing its dismal performance, industrial growth fell further to 1.9 per cent in September, mainly due to poor output from the manufacturing sector.

Growth in factory output, as measured in terms of the Index of Industrial Production (IIP), stood at 6.1 per cent in September last year, as per the latest data.

This development may prompt RBI to halt rate hikes in its policy review next month. Prime Minister's economic advisory panel chief C Rangarajan described the dip in factory output in September as "disappointing", while Chief Economic Adviser Kaushik Basu wanted the Reserve Bank if India (RBI) to have a "rethink" on its policy of monetary tightening.

"The conventional policy of interest rates... now you do have to rethink on that," Basu said while referring to the increase in policy rates by the central bank.

RBI has hiked key policy rates 13 times since March 2010 to tame rising prices.

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During the April-September period this fiscal, IIP growth stood at 5 per cent, as against 8.2 per cent in the same period last year.

Meanwhile, the IIP growth figure for August this year has been revised downward to 3.59 per cent from the provisional estimate of 4.1 per cent.

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The output of the manufacturing sector, which constitutes over 75 per cent of the index, grew by only 2.1 per cent in September, compared to 6.9 per cent expansion in the same month last year, according to official data released on Friday.

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Mining output declined by (-)5.6 per cent in September this year, as against a growth of 4.3 per cent in the same month last year.

Capital goods production witnessed negative growth of (-)6.8 per cent in September in comparison to a growth of 7.2 per cent in the corresponding month of 2010.

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Growth in production of intermediate goods slowed to 1.5 per cent during the month under review from 4.6 per cent in September, 2010.

Consumer non-durables output declined by (-)1.3 per cent during the month in comparison to a growth of 5.8 per cent in the corresponding month of the previous year.

However, electricity production improved, witnessing a growth of 9 per cent in September this year, as against growth of a mere 1.8 per cent in September, 2010.

Consumer durables output grew by 8.7 per cent in September, compared to a growth of 14.2 per cent in the corresponding month last year.

Growth in industrial output in the first half this fiscal also witnessed a marked slow down to 5 per cent in the April-September period from 8.2 per cent in the corresponding period last fiscal.

During the first half of 2011-12, mining output dipped to (-)1 per cent compared to 7.2 per cent.

Furthermore, growth in manufacturing output slowed to 5.4 per cent from 8.8 per cent in the corresponding six-month period a year ago.

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In sharp contrast, electricity production registered arobust growth of 9.4 per cent in the April-September periodthis year in comparison to 3.8 per cent in the same period ayear ago.

The IIP numbers for June have also been revised upward toa final figure of 9.45 per cent from the earlier estimate of 8.8 per cent.

The fall in the industrial production numbers, as shownby the latest data, suggests continued sluggishness in theeconomy, experts said.

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India's economy grew by 7.7 per cent in the April-June period, the slowest in six quarters.

India Inc had attributed the slowdown to rising interest rates, which have led to an increase in the cost of borrowing, thus hindering fresh investment.

The Reserve Bank has hiked interest rates 13 times since March, 2010, to tame inflation.

Headline inflation has been above the 9 per cent-mark since December last year and stood at a 13-month high of 9.78 per cent in August before moderating slightly to 9.72 per cent in September.