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IIP slips to disappointing 2% in April; raises rate cut hope

Last Updated: Wednesday, June 12, 2013 - 22:52

New Delhi: Showing no signs of recovery, the industrial output slipped further to a 'disappointing' 2 percent in April increasing the clamour for rate cut by the RBI and speedy clearances of projects to boost investment.

The Index of Industrial Production (IIP) in April has moderated from 3.4 percent in March on account of dismal performance of manufacturing and mining sectors, although it is better compared to a contraction of 1.3 percent in the same month of last fiscal.

Describing the IIP in April as "disappointing", Planning Commission Deputy Chairman Montek Singh Ahluwalia said: "The growth rate that has come out today is low...There is a slight upturn, but its not strong enough."

The decline in factory output has mainly been on account of dismal performance of key sectors like manufacturing, mining, power and capital goods sectors.

Manufacturing sector, which constitutes over 75 percent of the index, grew by a meagre 2.8 percent in April. In the year-ago period, however, it had declined by 1.8 percent.

Power generation grew by just 0.7 percent in April this year compared to a growth of 4.6 percent in same month last year. The mining sector output contracted by 3 percent in April this year compared to a decline in the production by 2.8 percent in April 2012.

Capital goods output saw a growth of just 1 percent in April, compared to a decline in production by 21.5 percent in the year-ago period.

Worried over slow growth, CII Director General Chandrajit Banerjee pressed for an "accommodative" monetary policy from the Reserve Bank to stimulate investment.

Alhuwalia too said that "RBI is watching the situation ...And I hope that they will make a sensible decision".

Meanwhile, decline in wholesale as well as retail inflation has raised the hope of rate cut by the central bank which is scheduled to announce mid-quarter monetary policy review on June 17.

Commenting on the IIP data for April, Ficci President Naina Lal Kidwai said: "Overall, the investment sentiment remains subdued in manufacturing and infrastructure and unless we see speedy implementation of projects stuck due to inter-ministerial clearances, industrial growth is likely to remain moderate."

She expressed concerns over the power sector, saying that "it would impact further the growth of manufacturing and has wider implications for competitiveness of the sector".

Meanwhile, the IIP growth rate for March this year has been revised to 3.4 percent from the provisional estimates of 2.5 percent released last month.

Industrial growth for 2012-13 fiscal has also been revised slightly upwards to 1.1 percent from provisional estimates of 1 percent released in May. IIP growth in 2011-12 was 2.9 percent.

Overall, 13 of the 22 industry groups in manufacturing sector showed positive growth during April.

The consumer goods output also saw just 2.8 percent growth in April, compared to 3.7 percent in same month last year.

The decline in the output of consumer durables stood at 8.3 percent in April, from a growth of 5.4 percent in the same month of 2012.

The consumer non-durables output grew by 12.3 percent in April, as against 2.3 percent in the same month last year.

The intermediate goods production grew by 2.4 percent in April, compared to a decline in output by 1.8 percent in the year-ago period.

The basic goods output grew by 1.3 percent in April, as against 1.9 percent in April 2012.

However, there has been some relief on the inflation front. Retail inflation has dropped for the third straight month to 9.31 percent in May.

According to the data released today, the retail inflation measured in terms of Consumer Price Index (CPI) stood at 9.39 percent in April.

The data for Wholesale Price Index-based inflation for May is expected on Friday. The WPI in April had eased to over 3-year low of 4.89 percent.

The RBI would take into account the drop in retail inflation as well as the WPI numbers while formulating its mid-quarterly policy review, which is scheduled on June 17.

In order to accelerate economic growth, the Reserve Bank of India (RBI) had last month cut key interest rates by 0.25 percent.


First Published: Wednesday, June 12, 2013 - 11:20
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