Industrial growth drops to "disappointing" 4.1% in Feb
New Delhi: Pulled down by poor performance of manufacturing and consumer goods, industrial growth slipped to 4.1 percent in February prompting government to state that the "disappointing" numbers will have bearing on the Reserve Bank when it takes a call on the interest rates on April 17.
Index of Industrial Production (IIP) grew by 6.7 percent in February 2011.
Rising interest rates and poor domestic demand aggravated by global uncertainties hit the industrial investment, Finance Minister Pranab Mukherjee said.
What is worse, the 6.8 percent industrial expansion in January has been drastically revised to 1.14 percent with Chief Statistician T C A Anant admitting "slippages" in data collection.
Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan said the government is setting up a committee to tighten sources of data gathering.
As per the IIP data released on Thursday, the growth in factory output for the cumulative April-February 2011-12 period more than halved to 3.5 percent from 8.1 percent from a year ago.
"These (IIP) figures will have bearing on monetary policy announcement scheduled for next week. The government along with RBI will take required steps to revive activity in the economy," Mukherjee said.
Key segments like manufacturing, consumer goods, consumer durables and intermediate items, are among the worst hit. In fact, consumer durables and intermediate goods slipped into negative zones.
Planning Commission Deputy Chairman Montek Singh Ahluwalia also described the IIP figures as "very very disappointing".
Industry said decline in industrial growth is a "cause for concern" and urgent steps are needed to bring reforms back to the forefront.
On the revision of IIP figure for January 2012 from 6.8 percent to 1.14 percent, Mukherjee said, "this is disappointing ... the revival in manufacturing in the last quarter of 2011-12 has not materialised as anticipated."
The revised growth rate in January will also have a bearing on the industrial output for the 2011-12 fiscal.
After taking into account the revised figures, the April-February 2011-12 IIP works out to be 3.5 percent, down from 8.1 percent in the corresponding period in the previous fiscal.
"There have been some slippages on that (IIP) and so we are reiterating that to ensure that such type of error do not occur (in future) ... I have taken up the matter with principal ministries and waiting for their response how they will respond to it. We will see that everybody improves the time of reporting," Anant said.
Mukherjee attributed the slowdown to, "uncertainty in the global economy coupled with monetary tightening in the past have impacted investment recovery".
According to the data, output of the manufacturing sector, which constitutes over 75 percent of the index, rose by just 4 percent in February, compared to 7.5 percent in February 2011.
Consumer goods output has also shown a slowdown as the production declined by 0.2 percent percent in February, as compared to 13.4 percent in the same month last year.
Besides, the consumer durables segment output contracted 6.7 percent in February, as against robust 18.2 percent growth in the same month last year.
However, the capital goods sector witnessed a growth of 10.6 percent, as against a contraction of 5.7 percent in the same month last year.
Mining output too has shown some improvement at 2.1 percent in February, as against 1.2 percent growth in the year-ago month.