Eluding fervent hopes in official quarters of a turnaround in the economy during the second-half of the fiscal year, the growth rate in industrial production contracted by 0.4 per cent in September following a dismal performance by the manufacturing sector, especially capital goods which sank deeper into negative terrain.
The all round poor show by all the major segments, as per the IIP (Index of Industrial Production) data, prompted India Inc. to clamour yet again for a cut in interest rates by the Reserve Bank of India (RBI) to kick-start a process of revival in investment and consumer demand. The rise in Consumer Price Index-based (CPI) retail inflationcame as a dampener as the apex bank is unlikely to oblige.
While the growth in factory output in September 2011 was 2.5 per cent, the plunge to negative territory in the same month this year came as a big disappointment to many, particularly when IIP growth had clawed back to 2.3 per cent in August 2012 to raise hopes of an industrial turnaround.
Commenting on the data, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: “The Index of Industrial Production (IIP) for September is obviously very disappointing...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 low point”. He viewed that the index numbers obviously did not reflect the impact of recent reforms initiatives as these would manifest with a lag in the later part of the fiscal.
India Inc., however, lost no time in pressing ahead for easing of interest rates along with implementation of a host of pending reforms to help the industry and the economy get back on track. In a statement, industry chamber FICCI pitched for implementing big ticket reforms, expediting infrastructure projects and easing monetary policy. The IIP data showed that the manufacturing sector, accounting for over 75 per cent of the index, shrank by 1.5 per cent this September as against a growth of 3.1 per cent in the same month last year. Accordingly, 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.
The capital goods segment fared worse as its output contracted by 12.2 per cent in September as compared to a decline of 6.5 per cent in September, 2011. Consumer goods production was also down by 0.3 per cent during the month as against a growth of 5.7 per cent in same month last year. In April-September this fiscal, growth in the segment was 2.5 per cent, down from 4.7 per cent in the first-half of last fiscal.
According to the data, the only positive growth was in mining output in September which went up by 5.5 per cent as against a contraction of 7.5 per cent while power generation growth slowed to 3.9 per cent from 9 per cent in the same month a year ago. In all, 12 of the 22 industry groups in the manufacturing sector showed growth in September.