Industrial growth slumps

Proving India Inc.'s fears of a slowdown coming true, industrial growth slumped to a nine-month low at 5.6 per cent in May as compared to an 8.5 per cent expansion posted a year ago. The evidently disappointing IIP (Index of Industrial Production) data prompted Finance Minister Pranab Mukherjee to say that the numbers were ‘not encouraging' and the government is taking steps to spur the manufacturing sector. With manufacturing and mining being the two sectors mainly responsible for the apparent slowdown, industry associations geared into action demanding special measures to boost the manufacturing sector while seeking a pause in key policy rate hikes by the Reserve Bank of India during its monetary policy review later this month.

A cautious Mr. Mukherjee also tended to agree with the industry's perception. “It [IIP data for May] is not encouraging... We are having discussions with various people, chambers of commerce and others and we are working out how to improve the manufacturing sector,” he said while talking to the media at a Nabard function here.

The IIP data, as per the new series launched earlier this fiscal, revealed that the slump in growth to 5.6 per cent in May this year from 8.5 per cent a year ago — the previous low was 4.5 per cent in August, 2010 — was primarily owing to a dismal show by manufacturing and mining coupled with poor offtake of capital goods.

Particularly disconcerting is the fact that industrial growth for April has been scaled down to 5.7 per cent from the earlier estimate of 6.3 per cent while the cumulative growth figure for April-May also stands pegged at 5.7 per cent as compared to 10.8 per cent in the same period last year. Still worse is that IIP growth during May under the old series (with base year 1993-94) works out to 3.6 per cent as against 12.2 per cent in May 2010.

As per the IIP data, the manufacturing sector (with a weight of over 75 per cent in the index) grew by a mere 5.6 per cent in May this year as against 8.9 per cent in the same month of 2010. Alongside, the mining sector grew by a paltry1.4 per cent during the month as against 7.9 per cent in May 2020.

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