New Delhi, May 12: Industry grew 3 per cent in March, its slowest in the last six years, on the back of a manufacturing slowdown.

In February, growth was at 8.6 per cent, while it was 14.8 per cent in March last year.

Manufacturing grew a dismal 2.9 per cent compared with a robust 16 per cent growth rate in March last year. Industry chambers blamed high lending rates for the slowdown in manufacturing.

The slide is likely to force policy-makers, both in the finance ministry and the Reserve Bank of India (RBI), to consider ways to ease lending rates and spur industry growth.

According to Amit Mitra, secretary-general of the Federation of Indian Chambers of Commerce and Industry, “The government should give a leg-up to industry by interest rate revision.”

He said the performance of the manufacturing sector was “expected to be lower even in the first quarter of 2008-09”.

According to D. Joshi, principal economist with rating agency Crisil, “The policy-makers will have to maintain a balance between growth and inflation. I think the focus will be shifting to growth now. The current policy stance is appropriate and, in hindsight, it is good that the RBI did not raise the repo rate.” Last month, the RBI had raised the cash reserve ratio — the portion of deposits that banks must keep with the RBI — but did not tinker with the repo rates, or the rates at which it borrows to and lends from banks.

Analysts said it was just not a case of a slump in manufacturing growth. Mining growth came down to 3.8 per cent from 8 per cent in March last year, despite rising mineral prices, while electricity grew just 3.7 per cent compared with 7.9 per cent in March last year.

Among those to show drop in production in March are cotton textiles, textile products (including apparel), wood and wood products, furniture and fixtures, metal products and parts (except machinery and equipment) and transport equipment and parts.

Output of metal products and parts fell 25.8 per cent.

In the last fiscal, mining grew 5 per cent compared with 5.4 per cent in 2006-07, manufacturing 8.6 per cent compared with 12.5 per cent in 2006-07 and electricity 6.4 per cent compared with 7.2 per cent.

Overall industrial growth declined to 8.1 per cent in 2007-08 compared with 11.6 per cent in 2006-07.

According to deputy chairman of the Planning Commission Montek Singh Ahluwalia, “There was an estimate of 8-8.5 per cent. The lower end of the range is acceptable.”

“Weak industrial production would continue to put depreciating pressure on the rupee in the near term,” Tushar Poddar, economist with Goldman Sachs, said.

Inflation trend

C. Rangarajan, chairman of the Economic Advisory Council to the Prime Minister, said inflation was expected to moderate to 6 per cent in the next three to four months.

“Inflation is likely to come down to 6 per cent in the next three to four months. Thereafter it can come down to 5-5.5 per cent depending upon the monsoon and other sectors,” he said.