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NEW DELHI: Industrial output growth slowed to 1.8% in December due to sustained sluggishness in the manufacturing sector and decline in mining and capital goods sectors.(sevenoya)
Data released by the Central Statistics Office on Friday showed the index of industrial production rose 1.8% in December, lower than the 5.9% growth posted in November and 8.1% registered in the same year-ago month. During April and December, industrial output clocked 3.6% growth compared to 8.3% in the corresponding period last year.
The industrial sector has been under stress for a significant period due to stubborn inflation, rising input costs, high interest rates and delay in implementation of projects and policy rollout.
Government data released earlier this month showed the economy is estimated to grow 6.9% in the current fiscal year which ends in March and the manufacturing sector is expected to expand 3.9% in 2011-12 compared to a growth of 7.6% in 2010-11. Some economists said if the trend persists it would be difficult to post 6.9% growth in 2011-12 as the industrial sector has to grow a minimum 6% in the last quarter.
Friday's data showed the mining sector declined 3.7% in December compared to 5.9% expansion posted in December 2010 while the manufacturing sector rose 1.8% compared to 8.7% growth in the same year-ago month. The electricity sector grew 9.1% in December compared to 5.9% growth registered in December 2010.
The capital goods sector posted the fourth consecutive month of decline. It fell 16.5% in December 2011 compared to a growth of 20.2% in December 2010. The sector has displayed volatility for the past of couple of months and economist said the decline showed that there is an investment slowdown.
Some economists said industrial production has bottomed out and is likely to make a slow recovery. But the recovery would depend on how government policies pan out in the months ahead and the global economic situation.
"While we do not expect any V-shaped recovery as was seen in the post-Lehman phase, the key to a sustained recovery could be some strong policy actions from the government post the ongoing state elections, a clear direction to fiscal containment and some stability in the global environment," said Indranil Pan, chief economist at Kotak Mahindra Bank.
The dismal industry data attracted calls for reducing interest rates. The Reserve Bank of India (RBI) has raised interest rates 13 times since March 2010 to tame high inflation but in its latest policy review has signalled that it may ease its tight monetary policy if the easing trend in inflation is sustained. Economists said they expect the RBI to begin its interest rate cutting cycle after the Union budget is presented on March 16.
"From the monetary policy side, we continue to expect RBI to start its repo rate cutting cycle by 25 basis points on April 17. However, we do not anticipate an aggressive increase in monetary accommodation as risks to inflation continue to remain strong," Kotak Mahindra's Pan said.
Industrial growth slows to 1.8% - The Times of India
Data released by the Central Statistics Office on Friday showed the index of industrial production rose 1.8% in December, lower than the 5.9% growth posted in November and 8.1% registered in the same year-ago month. During April and December, industrial output clocked 3.6% growth compared to 8.3% in the corresponding period last year.
The industrial sector has been under stress for a significant period due to stubborn inflation, rising input costs, high interest rates and delay in implementation of projects and policy rollout.
Government data released earlier this month showed the economy is estimated to grow 6.9% in the current fiscal year which ends in March and the manufacturing sector is expected to expand 3.9% in 2011-12 compared to a growth of 7.6% in 2010-11. Some economists said if the trend persists it would be difficult to post 6.9% growth in 2011-12 as the industrial sector has to grow a minimum 6% in the last quarter.
Friday's data showed the mining sector declined 3.7% in December compared to 5.9% expansion posted in December 2010 while the manufacturing sector rose 1.8% compared to 8.7% growth in the same year-ago month. The electricity sector grew 9.1% in December compared to 5.9% growth registered in December 2010.
The capital goods sector posted the fourth consecutive month of decline. It fell 16.5% in December 2011 compared to a growth of 20.2% in December 2010. The sector has displayed volatility for the past of couple of months and economist said the decline showed that there is an investment slowdown.
Some economists said industrial production has bottomed out and is likely to make a slow recovery. But the recovery would depend on how government policies pan out in the months ahead and the global economic situation.
"While we do not expect any V-shaped recovery as was seen in the post-Lehman phase, the key to a sustained recovery could be some strong policy actions from the government post the ongoing state elections, a clear direction to fiscal containment and some stability in the global environment," said Indranil Pan, chief economist at Kotak Mahindra Bank.
The dismal industry data attracted calls for reducing interest rates. The Reserve Bank of India (RBI) has raised interest rates 13 times since March 2010 to tame high inflation but in its latest policy review has signalled that it may ease its tight monetary policy if the easing trend in inflation is sustained. Economists said they expect the RBI to begin its interest rate cutting cycle after the Union budget is presented on March 16.
"From the monetary policy side, we continue to expect RBI to start its repo rate cutting cycle by 25 basis points on April 17. However, we do not anticipate an aggressive increase in monetary accommodation as risks to inflation continue to remain strong," Kotak Mahindra's Pan said.
Industrial growth slows to 1.8% - The Times of India
