Attributing the “disappointing” industrial growth performance to tight monetary policy and global factors, Finance Minister Pranab Mukherjee on Thursday said the government and the RBI will take steps to revive growth.
“These (Index of Industrial Production) 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,” he told reporters in New Delhi.
Mr. Mukherjee was commenting on the IIP data which revealed that industrial growth rate slipped to 4.1 per cent in February from 6.7 per cent a year ago. During April-February 2011-12, IIP slipped to 3.5 per cent, as against 8.1 per cent a year ago.
He further said that “uncertainty in the global economy coupled with monetary tightening in the past have impacted investment recovery”.
The RBI, which had raised interest rates 13 times since March 2010 to contain spiralling inflation, is yet to reverse its decision though the price situation has improved considerably. It kept the rates unchanged in its policy reviews in December 2011 and February 2012.
The RBI is scheduled to announce the credit policy on April 17, 2012 amid demand for cut in short-term lending (repo) rates.
On the revision of IIP figure for January 2012 from 6.8 per cent to 1.14 per cent, Mr. Mukherjee said, “This is disappointing... the revival in manufacturing in the last quarter of 2011-12 has not materialised as anticipated.”
Mr. Mukherjee attributed the negative growth in the consumer goods sector to considerable moderation in domestic demand.
The consumer goods sector output declined by 0.2 per cent in February as against a robust growth of 13.4 per cent in the corresponding period a year ago.
However, on the positive side, he said, capital goods output for February 2012 showed an expansion of 10.6 per cent on back of domestic investment recovery.
The good news for this year, he added, “is strong performance in electricity sector which has recorded a growth of 8 per cent in April-February (2011-12) period as against 6 per cent in same period last year.”
During February, output of the manufacturing sector, which constitutes over 75 per cent of the index, rose by just 4 per cent in February, compared to 7.5 per cent in the same month in 2011.
Industry has been blaming the slowdown in growth to the high interest rate regime that has made borrowings costly and curbed consumer spending.