New Delhi, June 12
There is more bad news for the economy as growth worries for the economy are mounting with the industrial production numbers for April came in at a very low 0.1 per cent today brightening the prospects of a rate cut by the Reserve Bank of India (RBI) next week.

The caveat is that the industrial growth numbers have been very volatile and unreliable in the last few months and many analysts have questioned their authenticity. As many as 10 of the 22 segments, including capital goods and mining, posted negative growth. The IIP had grown by 5.3 per cent in April 2011. The consolation is that the April numbers were in the green, though only marginally, an improvement from the decline of 3.2 per cent in March. However, in a perverse kind of way, stock markets rallied today by 184 points as a weaker industry data is now pointing more clearly at a hefty rate cut.

The bad industrial production data comes just a day after rating agency, Standard & Poor’s (S&P) had warned that India could face a downgrade on concerns of a slowdown. Finance Minister Pranab Mukherjee expressed disappointment at the latest figures citing weak industrial activity and negative sentiments and promised that the government would take steps to give positive signals.

The economy is caught in a pincer grip of a tough international environment and domestic slowdown. The main problem in industrial activity is that fresh investments are not taking place as the sentiment is bad, clearances are stuck, decision making has frozen due to a wave of scams in which earlier approvals are also coming under scrutiny and new economic initiatives are not fructifying because of political opposition and ally pressure.

RV Kanoria, President, Ficci, said the IIP figures of 0.1 per cent reconfirms that Indian industry is in the midst of crisis and business sentiments were indeed very low. He said the government needs to take bolder decisions and at a much faster pace to push forward reforms for a quick turnaround in the industrial growth.

Analysts say the poor data could lead to a rate cut. Dipen Shah, Head of Fundamental Research, Kotak Securities, said the IIP for April came in below estimates, largely on the back of the mining and manufacturing segments. He said the data, which has been volatile of late, reflects the impact on the industrial sector due to the high interest rates and also due to the delays in policy initiatives.