New Delhi, Nov. 12: A surprising contraction in industrial production dashed hopes of festival sales leading an early economic revival as India Inc pressed for an interest rate cut by the Reserve Bank of India.
Industrial production contracted 0.4 per cent in September because of the dismal performance of manufacturing, consumer as well as capital goods output. The output turned negative in September after showing a 2.3 per cent growth in the previous month. The Index of Industrial Production (IIP) was at 2.5 per cent in the corresponding period of last year.
Analysts had hoped that the festival season, which began in September and will peak this month, would boost sales.
“The IIP numbers for September are obviously very disappointing. The data do not reflect the impact of any recent initiatives. These initiatives will also take some time to have an impact,” Planing Commission deputy chairman Montek Singh Ahluwalia said.
The government has taken a slew of measures, including raising subsidised diesel prices and opening sectors such as multibrand retail and aviation to foreign players.
Ahluwalia said, “We have to look to the second half of the current year to see if the economy is actually going to do better. September data is obviously a bit of a low point.”
The IIP data showed that the output of the manufacturing sector, which constitutes over 75 per cent of the index, contracted 1.5 per cent in September against a growth of 3.1 per cent in the same month last year.
Industrial output in the April-September period this fiscal stood at 0.1 per cent down from 5.1 per cent in the same period of 2011-12.
Consumer goods production was down 0.3 per cent in September compared with a growth of 5.7 per cent in the same month last year. In the April-September period of this fiscal, the growth in the segment was 2.5 per cent compared with 4.7 per cent in the first half of last fiscal.
Prime Minister’s Economic Advisory Council (PMEAC) chairman C. Rangarajan said it was disappointing to see IIP slipping into the negative after showing signs of improvement in August and hoped that things would improve in the coming months.
According to the output data, production in the manufacturing sector in April-September this year also dipped by 0.4 per cent against a growth of 5.5 per cent in the same period in 2011-12.
Capital goods is another segment where output declined by 12.2 per cent in September against a contraction of 6.5 per cent in September 2011. The production of such goods contracted in the first half of this fiscal by 13.7 per cent against a growth of 4.6 per cent in 2011-12.
Industrial output has shrunk in five of the seven months through September as high interest rates eat into demand and slow policy reforms hurt investor confidence.