NEW DELHI, Sept 12: Decline in manufacturing sector growth pulled down the overall industrial expansion to just 0.1 per cent cent in July, prompting India Inc to press for at least 0.50 per cent cut in interest rate by the Reserve Bank in its policy review next week.
Growth in factory output, as measured by the index of industrial production (IIP), during the April-July period contracted by 0.1 per cent, official data said.
However, on sequential basis July’s growth at 0.1 per cent is an improvement over (-) 1.8 per cent recorded in June.
The worst performer has been the manufacturing sector, which constitutes over 75 per cent of the index, showing a decline of 0.7 per cent in July, and 0.9 per cent in the April-July period.
Concerned over the performance of the manufacturing sector, industry chamber Ficci urged the “RBI to cut down interest rates further at least by another 50 basis points immediately”.
Among the different industrial segments, production of capital goods, which refers to the equipment used by industry to produce consumer items, declined by 5 per cent. During the April-July period, the output of the sector contracted by 16.8 per cent.
“The economy is in need of sentiment boosters. Investments have dried up… It is imperative that non- legislative policy measures are announced at the earliest, which could help improve confidence levels in the economy,” industry chamber CII said.
The Reserve Bank is scheduled to announce its mid- quarterly review of monetary policy on Monday which might contain some steps to boost growth. Finance Minister P Chidambaram, who met heads of PSUs today, has already indicated that steps would be taken to boost investment.
The Department of Economic Affairs Secretary Arvind Mayaram had said yesterday that the government would soon come out with steps to contain fiscal deficit and promote investments as well as GDP growth that had dipped to 9-year low of 6.5 per cent in 2011-12.
Meanwhile, the Commerce and Industry Ministry has called a meeting of central ministries, state government officials as well as industry representatives tomorrow to chalk out the strategy for reviving the manufacturing sector.
The industrial output in July last year was 3.7 per cent, and 6.1 per cent in the April-July period in 2011-12.
Mining sector output dipped by 0.7 per cent in July, as against a growth of 0.7 per cent in the same month a year ago.
Consumer goods production was up 0.7 per cent in July as compared to 6.4 per cent growth in the same month last year.
In all, only 8 of the 22 industry groups in the manufacturing sector showed positive growth in July 2012.
Consumer durables production showed a decline in growth rate as this segment increased by 1.4 per cent in July, compared to 9 per cent in the same month last year.
The consumer non-durables output growth declined to 0.1 per cent in July, as against a growth of 4.1 per cent in the same month last year.
The basic goods production growth slowed to 1.5 per cent in July, compared to 10 per cent a year ago. Power generation too witnessed a dip in growth rate as it declined to 2.8 per cent during July, compared to 13.1 per cent in the same month a year ago.
Experts said, however, it is unlikely that RBI would cut interest rates in the upcoming monetary policy review.
“RBI’s policy focus is still on inflation. I think it will hold the policy rates steady,” Crisil Chief Economist D K Joshi said. (PTI)
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