IIP slumps in November

The country’s industrial output in November slowed to an 18-month low of 2.7%. A sluggish 2.3% expansion in the manufacturing sector was mainly responsible for the slump. The latest industrial data heaped more pressure on the government already battling high food prices, as worries about a possible industrial slowdown gathered pace and posed a dilemma for the Reserve Bank of India which is widely expected to raise interest rates to calm rising inflation. Industrial production data has displayed volatility in recent months but policymakers said the November data needed to be examined in detail before drawing any conclusion.RBI has raised interest rates six times in 2010 to tame inflation. Electricity and mining sectors remained buoyant in November rising 4.6% and 6% respectively from as year-ago. The capital good sector, a key gauge of industrial activity, remained buoyant growing 12.6% while consumer goods declined 3.1% in November and consumer non-durables fell 6% compared to the same year-ago period. Barclays Capital said the decline in the consumer durables output in November could be on the back of a reduction in festival-related buying, smaller number of working days and ongoing tightening of interest rates. But it expects industrial production data to remain soft in the months ahead.

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