IIP (Index of Industrial Production) growth slows to 4.10 per cent in India (WEDNESDAY, OCTOBER 12, 2011)

The industrial growth of the country slowed to 4.10% in August on account of the poor performance of the manufacturing sector and a decline in mining output, indicating an economic slowdown.

Growth in factory output, as measured in terms of the Index of Industrial Production (IIP), stood at 4.50% in August last year. During the April-August period this fiscal, IIP growth stood at 5.60%, as against 8.70% in the same period last year. Meanwhile, the IIP growth figure for July this year has been revised upward to 3.80% from the provisional estimate of 3.30%.

The output of the manufacturing sector, which constitutes over 75% of the index, grew by only 4.50% in August, compared to 4.70% expansion in the same month last year.

Mining output declined by 3.40% in August this year, as against a growth of 5.90% in the same month last year.

Growth in capital goods output slowed to 3.90% in August, in comparison to a growth of 4.70% in the same month of 2010.

Growth in production of intermediate goods slowed to 1.30% during the month under review, as against a growth of 5.80% in August, 2010.

Consumer durables output grew by 4.60% in August, compared to a growth of 8.10% in the corresponding month last year.

However, electricity production improved, witnessing growth of 9.50% in August this year, as against mere growth of a mere 1.00% in August, 2010.

Non-durable consumer goods (FMCG) production also grew by 2.90% in August, compared to growth of 1.80% in the same month last year.

Output of overall consumer goods increased by 3.70% in August this year, compared to a growth of 4.60% in August, 2010.

The IIP numbers for May have also been revised upward to a final figure of 6.20% from the earlier estimate of 5.90%.

The fall in the industrial production numbers, suggests continued sluggishness in the economy. 

India's economy grew by 7.70% in the April-June period, the slowest in six quarters.

India Inc had attributed the slowdown to rising interest rates, which have led to an increase in the cost of borrowings, thus hindering fresh investments.

The Reserve Bank has hiked interest rates 12 times since March, 2010, to tame inflation. Headline inflation has been above the 9 per cent-mark since December last year and stood at a 13-month high of 9.78 per cent in August.

Emerging markets from Brazil to Indonesia have cut borrowing costs to shield expansion as Europe’s debt woes and a faltering U.S. recovery hurt the world economy. In India, the fastest inflation in more than a year is sustaining pressure for higher rates even as consumer demand wanes.

The Indian rupee has weakened 8.9 percent against the dollar this year, the worst performer in Asia, threatening higher import costs.

Sales by companies including Maruti Suzuki India Ltd., the nation’s biggest carmaker, fell 1.8 percent in September, the third straight monthly decline, the Society of Indian Automobile Manufacturers said Oct. 10.

India’s manufacturing grew in September at the slowest pace in 2 1/2 years, according to the Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics.

India’s merchandise export growth slowed for a second straight month in September. Shipments rose 36.3 percent to $24.8 billion from a year earlier. Exports gained 44.3 percent in August.