Industrial growth dips to 4.4% in September

The rate of growth in India's factory output nearly halved from 8.2% a year ago to 4.4% in September, the sharpest decline in 16 months, signifying a slowdown in demand across sectors in the wake of rising interest rates from the RBI's tight monetary moves. FM Pranab Mukherjee expressed concern at the sluggish pace of factory output and said the data has to be analysed before concluding anything. "We will have to analyse why that is happening. And after that considered comments can be made. But it's a matter of concern," he told reporters. Manufacturing, which constitutes almost 80% of the industrial production, grew at 4.5% against 8.3% a year ago. Power generation, another major indicator of industrial activity, expanded by only 1.7% against 7.5% in the previous corresponding period. For the first six months of the ongoing fiscal, industrial output recorded a growth of 10.2% against 6.3% a year ago. Many analysts, therefore, remain optimistic for the next few months and are banking on the festive season demand and prospects of good farm output to prop up the future numbers. They attributed the decline partly to the rising interest rate cycle. The last time inductrial growth rate slipped below 4% was in May 2009 when it stood at 1.69% as major global economies found themselves in dire straits. Four of 17 industries recorded contraction in output and that include chemicals and metals. Labourintensive sectors such as woods and textiles reported sluggish growth. The degree of slowdown this time can be gauged from the fact that it lost steam despite part of the data taken on a new series of wholesale price index with 2004-05 as the base year against 1993-94 earlier. The slowdown, together with a declining food inflation, will move the RBI to press the pause button on its move to raise key rates to suck out liquidity and check consumption. Capital goods industry contracted by 4.2% in September against 7.9% a year ago. Consumer durable goods' production declined by 10.9% in September against 21.9% a year ago, consumer non-durables by 2.5% compared to 3.9%, intermediate goods by 10.3% against 10.6% and basic goods by 5.5% against 6.1% in the year-ago period.