Industrial Growth Slows To 4.1% In August

The industrial growth of the country slowed to 4.1 per cent in August on account of the poor performance of the manufacturing sector and a decline in mining output, indicating an economic slowdown.

Growth in factory output, as measured in terms of the Index of Industrial Production (IIP), stood at 4.5 per cent in August last year.

During the April-August period this fiscal, IIP growth stood at 5.6 per cent, as against 8.7 per cent in the same period last year.

Meanwhile, the IIP growth figure for July this year has been revised upward to 3.8 per cent from the provisional estimate of 3.3 per cent.

The output of the manufacturing sector, which constitutes over 75 per cent of the index, grew by only 4.5 per cent in August, compared to 4.7 per cent expansion in the same month last year, according to official data released today.

Mining output declined by 3.4 per cent in August this year, as against a growth of 5.9 per cent in the same month last year.

Growth in capital goods output slowed to 3.9 per cent in August, in comparison to a growth of 4.7 per cent in the same month of 2010.

Growth in production of intermediate goods slowed to 1.3 per cent during the month under review, as against a growth of 5.8 per cent in August, 2010.

Consumer durables output grew by 4.6 per cent in August, compared to a growth of 8.1 per cent in the corresponding month last year.

However, electricity production improved, witnessing growth of 9.5 per cent in August this year, as against mere growth of a mere 1 per cent in August, 2010.

Non-durable consumer goods (FMCG) production also grew by 2.9 per cent in August, compared to growth of 1.8 per cent in the same month last year.

Output of overall consumer goods increased by 3.7 per cent in August this year, compared to a growth of 4.6 per cent in August, 2010.

The IIP numbers for May have also been revised upward to a final figure of 6.2 per cent from the earlier estimate of 5.9 per cent.

The fall in the industrial production numbers, as shown by the latest data, suggests continued sluggishness in the economy, experts said.

India's economy grew by 7.7 per cent in the April-June period, the slowest in six quarters.

India Inc had attributed the slowdown to rising interest rates, which have led to an increase in the cost of borrowings, thus hindering fresh investments.

The Reserve Bank has hiked interest rates 12 times since March, 2010, to tame inflation. Headline inflation has been above the 9 per cent-mark since December last year and stood at a 13-month high of 9.78 per cent in August.

SIAM Cuts Sales Forecast

On Monday, an industry body cut its sales growth target for cars in this fiscal year to 2-4 percent, a sharp drop from the 30 percent growth clocked in the previous year.

Infrastructure sectors such as coal and cement, key to India's growth and contributing about 38 percent to the index of industrial output, grew just 3.5 percent in August.

In August, the capital goods sector grew 3.9 percent after contracting almost 14 percent in July. This data is known to be volatile however, and the rebound may not indicate an industrial recovery.

Manufacturing output, which constitutes about 76 percent of the industrial production, rose an annual 4.5 percent in August.

In its Sept. 16 review, the RBI had said that a premature change in the policy stance could harden inflationary expectations, diluting the impact of past policy actions.

Its next rate decision is on Oct. 25. A Reuters poll last month found that economists expect one more interest rate increase in 2011, which would make India an outlier in a world where most central banks are looking to stimulate growth.

(Agencies)