Sept industrial output slumps to 1.9 pc

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SME Times News Bureau | 11 Nov, 2011
Industrial output fell sharply in September, growing by a slow 1.9 percent because of a fall in mining activity and a dip in manufacturing output, official data showed today.

Industrial production has been sluggish in the quarter ending September, with India Inc blaming rising interest rates, which shot up after successive rate hikes by the Reserve Bank of India (RBI) and a slowdown in overall investment activity because of uncertainty in the global economy.

Growth in factory output, measured in terms of the Index of Industrial Production (IIP), showed only a 3.8 percent increase in July, and nudged up further to 4.1 percent in August.

For the half year in the current fiscal IIP has increased by 5 percent, compared to 8.2 percent in the April-September period of 2010-11, according to data released by the ministry of statistics and programme implementation.

In September, mining output fell by 5.6 percent, while the sector's cumulative production fell by 1 percent in the first six months of 2011-12.

Manufacturing sector, which has the highest weightage in the IIP, production grew at a sluggish rate of 2.1 percent in September, while electricity output registered a good growth of 9 percent during the month under review.

Manufacturing sector, which constitutes over three-fourths of the IIP index, registered cumulative growth of 5.4 percent in April-September period.

Out of 22 industry groups, 15 registered positive growth in the month under review.

Although, the RBI had indicated in the last rate increase that it would hold off further increases, if inflation started coming down from December as expected, the continuing slump in industrial production growth may pressure the central bank in actually giving a break to the rate hike cycle.

Food inflation, however, still continues to reign in double digits, putting policymakers in a quandary.