M A I N   N E W S

July industrial growth plunges to 21-month low
Sanjeev Sharma /TNS

New Delhi, September 12
Industrial output growth in July slumped to 3.3 per cent, the lowest in almost two years, accentuating fears that a slowdown is imminent. Capital goods, manufacturing and mining posted a very poor performance indicating weakness in the economy. Such figures were last seen in October 2009.

Rajiv Kumar, Secretary General, Federation of Indian Chambers of Commerce and Industry (FICCI) said that the IIP number was one third of last year’s growth. He said that the outlook was bleak.

Capital goods have registered negative growth, the lowest growth in last 24 months. Production of capital goods declined by 15.2 per cent in July, in comparison to a growth of 40.3 per cent in the same month of 2010.

There is a view that given the weakness in the industrial output, the Reserve Bank of India may pause its rate hiking spree in the battle against inflation.

“The situation is indeed serious as both manufacturing and mining sectors’ growth has dipped significantly as against last year and unless corrective policy actions are taken we may enter the negative territory soon,” said Kumar.

The Confederation of Indian Industry (CII) said the July IIP data was disappointing and vindicates the expectation that the industrial sector will continue to show weak performance.

Chandrajit Banerjee, director general, CII said there was concern on the investment outlook, given the weakness in the capital goods sector. The outlook for the sector remains weak, as order books are showing signs of moderation.

For this to be reversed, CII has recommended that the government should fast-track the implementation of some key projects. CII has asked the RBI to refrain from raising interest rates at its monetary policy meeting on Friday.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) said high interest rates had started impacting factories and the RBI should not increase interest rates. The July slowdown was driven by squeeze in demand momentum and may impact GDP growth estimates.

FICCI has asked the government to improve industrial climate and business environment, stimulate investment and ensure adequate feedstock linkages and development of industry-relevant skills. 

In the Slow lane

Capital goods sector weak as order books have showed signs of moderation

There is a view that the RBI may not hike rates in its monetary policy review this Friday