Factory output declined 1.8 per cent in June, driven down by a slump in manufacturing. Output of capital goods and non-durable goods dipped sharply.

This performance pales against the robust 9.5 per cent growth the Index of Industrial Production (IIP) recorded in June last year. The situation is not all that comforting even from the standpoint of the first quarter.

The Index declined 0.1 per cent in April-June against 6.9 per cent growth in the same quarter last year, according to official data released here on Thursday.

Expressing disappointment over the decline in IIP, Finance Minister P. Chidambaram said in a statement that the overall contraction was mainly due to the dip in the manufacturing sector (-3.2 per cent in June and -0.7 per cent in April-June).

He pointed out that within the manufacturing sector, capital goods declined 27.9 per cent in June and consumer non-durables declined 1 per cent in the same month.

Chidambaram said bottlenecks should be removed to facilitate investments in critical sectors. Production will revive if there are new investments in the demand creating industries, he said.

Reacting to the June performance, Planning Commission Deputy Chairman Montek Singh Ahluwalia said that industrial numbers have been “disappointing” for the first few months this fiscal.

Economy watchers say the weak industrial output numbers for June may prompt the Reserve Bank of India to cut policy rates at its mid-quarter monetary policy review meeting on September 16.

According to economists, most worrisome is the contraction in consumer non-durables. For four successive months, consumer non-durables have declined month-on-month.

>srivats.kr@thehindu.co.in

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