Index of Industrial Production (IIP) fell by 1.6 per cent in May compared to a year ago mainly due to sluggish performance by manufacturing and mining sectors.

A contraction in output was also witnessed in basic, capital as well as consumer goods — a phenomenon that was last observed in February, 2009.

The current slowdown in the industrial sector is a reflection of slowing investments as well a sustained moderation in consumption demand.

This data is likely to have a bearing on first quarterly monetary policy review to be unveiled by the Reserve Bank on July 30. “The impact of various measures taken in the last six-seven months will be felt in the second-half of the year...therefore, going ahead, I think the situation will improve,” said C. Rangarajan, Chairman of the Prime Minister's Economic Advisory Council, reacting to this data.

The IIP was 1.9 per cent in previous April and 2.5 per cent in May last year.

During April-May, the factory output, measured in terms of IIP, was a mere 0.1 per cent, down from 0.6 per cent in the corresponding period last fiscal.

The manufacturing sector, which constitutes over 75 per cent of the index, contracted by 2 per cent in May as against a growth of 2.6 per cent in the year-ago month.

Mining sector

The mining sector output, too, declined by 5.7 per cent in May, compared to a dip in production by 0.7 per cent in the year-ago period.

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