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With growth dipping in the capital goods and mining sectors, the industrial production growth rate turned negative again in November.
This new number may put more pressure on the Reserve Bank of India to cut rates in its third quarter review of monetary policy on January 29.
According to an official statement, the industrial output, as measured by the Index of Industrial Production (IIP), dipped to (-) 0.1 per cent from a robust 8.3 per cent in October and from six per cent in November 2011. The current data are the lowest in the last four months.
The manufacturing sector, which constitutes over 75 per cent of the index, grew by meagre 0.3 per cent in November 2012, against 6.6 per cent in 2011. Mining output in November contracted by 5.5 per cent compared with a decline in production by 3.5 per cent in same month in 2011.
Capital goods output declined by 7.7 per cent in November (4.7 per cent).
The latest figure might be a cause for worry for industry, but the Government does not seem too perturbed. Deputy Chairman of the Planning Commission Montek Singh Ahluwalia attributed the decline in industrial output in November to statistical reasons.
“This data do not contradict the proposition that the economy has bottomed out. It now needs to move upwards...you need to wait to see what December is like,” he told reporters.
Ahluwalia also expressed hope that reform steps taken by the Government have given clear signals of growth in the last several months and would help in improving the investment climate.
Moreover, he said the results of the Government’s decision to remove major bottlenecks for big infrastructure projects and improve coal availability for the power sector would become manifest soon.
Industry worried
However, industry felt that the slowdown was still to be arrested.
“While the data are indicative of a high degree of volatility in the index, as IIP has again registered negative growth after high growth in October, but the negative growth in mining, capital goods and intermediate goods indicates continuation of industrial slowdown for some more time,” FICCI President, Naina Lal Kidwai said.
Kidwai urged the Government to not just announce more confidence building measures but also quickly resolve ground-level problems through mechanisms like the Cabinet Committee on Investment to stimulate economic activity.
“We also urge the RBI to consider reducing interest rates to boost both investment and consumer demand,” Kidwai said.
CII Director-General Chandrajit Banerjee hoped the RBI would finally take note of the serious situation in industry and reduce the repo rate and cash reserve ratio by at least 50 basis points each to ease cost and availability of capital.
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