New Delhi: In a major worry for the Modi government, industrial production growth nose-dived in October; contracting by 4.2 per cent. It is the sharpest dec-line in industrial production in at least two years. This even as retail inflation based on Consumer Price Index (CPI) fell to 4.38 per cent in November— lowest since the news series was started in January 2012. This is the fifth consecutive month of decline in inflation and has led the industry to demand a cut in interest rates to give a boost to the industrial production.
Amid industry and government demanding a cut in interest rates, RBI Governor Raghuram Rajan on Friday met finance minister Arun Jaitley to discuss a range of “economic issues”.
According to the data, manufacturing growth contracted by 7.6 per cent in October. In September industrial production had grown by 2.8 per cent. The production of capital goods, a barometer of demand, declined by 2.3 per cent in October. The consumer goods growth contracted by 18.6 per cent. Consumer non-dur-able goods contacted by 4.3 per cent and durables saw a negative growth of 35 per cent.
“Today’s figures could be overstating the downturn in industrial production as the data is generally very volatile and subject to revision. That said the demand for consumer goods remained weak despite the festive season,” said rating agency Crisil. It said that though inflation fell rapidly, a dent in farm incomes due to poor monsoon season is believed to have kept consumption demand low.
Industry also expressed concern over fall in the industrial production. “The fall in manufacturing growth in October is disturbing, more so because it is broad based and not limited to a few sectors,” said Sidharth Birla, President, FICCI. He said that it not only reflects slowdown in investments but also the deep rooted slackness in consumer demand which requires bringing down the interest rates urgently. “It would also need faster implementation of Government’s intentions to introduce reforms in which States have major role to play”, he added.
