Aug industry growth slows to 0.6%; companies seek rate cut

Aug industry growth slows to 0.6%; companies seek rate cut

Last Updated: Saturday, October 12, 2013, 09:22
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Aug industry growth slows to 0.6%; companies seek rate cut
New Delhi: Industrial production dipped to a "disappointing" 0.6 percent in August after some signs of improvement in the previous month, prompting companies to step up their demand for a rate cut to boost economic growth.

Factory output, which showed some signs of recovery after recording a growth of 2.8 percent in July, remained almost flat year-on-year because of a slump in production of consumer goods and durables.

The low growth in the Index of Industrial Production (IIP) is due to contraction in the mining and manufacturing sectors, showed the data released by government today.
IIP grew by 2 percent in August last year.

"The numbers are really disappointing, it is very low," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here.

As per the data released by the government today, IIP for April-August worked out to be 0.1 percent compared with 0.2 percent in the same period of 2012-13 financial year.

The IIP figure for July has been revised upward to 2.8 percent from 2.6 percent, it said. It had contracted by 1.8 percent in June.

Reacting to the data, industry chamber CII said demanded a cut in the key policy rate from RBI, which had hiked repo rate in its last monetary policy.

"While fully appreciating the RBI's compulsions to keep inflation under check, it is important that the RBI takes cognisance of the condition that industry is in, and reduce interest rates to revive demand," it said.

RBI's next monetary policy review is on October 29.

The manufacturing sector, which constitutes over 75 percent of the index, contracted by 0.1 percent in August as against an expansion of 2.4 percent in the year-ago period.

The mining sector, with a weight of about 14 percent in the IIP, showed a contraction of 0.2 percent in August as against a decline of 0.3 percent in the same period a year ago.

As per the IIP data, power generation showed a healthy growth of 7.2 percent in the month under review. The growth works out at 4.5 percent in April-August period.

Output of capital goods, a parameter of demand, showed a decline of 2 percent as against a contraction of 4.4 percent in August 2012. However, on cumulative basis, the segment showed an expansion of 0.8 percent in April-August as against a sharp contraction of 14.4 percent.

Economic Research Department of SBI said that IIP growth for August fared worse than street expectations.

On possibility of rate cuts by the RBI, Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan said that it will depend on the inflation data as well as the conditions in the foreign exchange market.

Another leading chamber FICCI said: "We need continued focus on reforms and implementation to ensure that investor's confidence does not fall and growth of industry is restored".

The data further revealed that consumer durables segment contracted by 7.6 percent in August, while the decline in consumer goods segment was 0.8 percent.

The growth in consumer non-durables sector was 5 percent as against 6 percent in the year-ago period. During April- August, the growth cumulates to 6.6 percent.

Intermediate goods segment expanded at a rate of 3.6 percent and basic good at a rate of 1.5 percent in August.
Giving further details, the data showed there was contraction in host of segments, including food products and beverages, wood and its products, basic metals, fabricated metal products and machinery and equipment.

There were expectations that the industrial production (IIP) would be better in the backdrop of the eight infrastructure industries posting a 7-month high growth rate of 3.7 percent in August.

These eight industries have a weight of about 38 percent in the IIP.


First Published: Friday, October 11, 2013, 18:40


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