India’s industrial output up 6.8 percent in January (Lead)

March 12th, 2012 - 9:02 pm ICT by IANS  

Pranab Mukherjee New Delhi, March 12 (IANS) India’s industrial output rose the fastest in seven months at 6.8 percent in January, helped by a robust show in the manufacturing sector, kindling hope of a rebound in overall economic growth, government data showed Monday.

The manufacturing sector, which constitutes over three-fourth of the index of industrial production, expanded by a robust 8.5 percent in January after sluggish growth registered in the previous months.

Consumer goods saw a huge 20.2 percent rise in January, data released by the ministry of statistics and programme implementation revealed.

Finance Minister Pranab Mukherjee said the monthly data gave an indication of strong economic recovery.

“It (industrial output growth) is 6.8 per in January. There is strong recovery in the backdrop of last December’s figure where IIP grew by 1.8 percent,” Mukherjee said.

Capital goods production, however, continued to slip. It logged minus 1.5 percent in the month under review, having fallen by a whopping 16.5 percent in the previous month.

Mukherjee said the poor show of capital goods remained a matter of concern.

“There is not much progress in capital goods, which is a matter of concern. Consumer non-durable had contributed substantially in this growth, but not so much in consumer durables.

“In course of time, efforts will have to be made to build up these areas.”

The index of industrial production (IIP) — a barometer of factory production - registered a cumulative growth of 4 percent in the first 10 months of the financial year ending March 31.

The factory output grew at snail’s pace at 1.8 in December, underlining the slowdown in the economy and putting pressure on policymakers to take steps to stem the fall.

The IIP has been on a see-saw trend. It contracted by 5.1 percent in October, before expanding by 5.9 percent in the next month. But data for December showed the barometer plunging to a slow 1.8 percent.

The industry has been clamouring for interest rate easing. In response, the Reserve Bank of India cut the cash reserve ratio by 75 basis points last week, bringing in the much needed liquidity to the market.

But a rate cut may not happen till April when the apex bank spells out the monetary policy for 2012-13.

The mining sector’s output contracted by 2.7 percent. electricity generation was moderate at 3.2 percent.

Industry leaders said the recovery would be temporary if the government failed to push forward the key reforms and take bold measures in the upcoming budget to boost growth.

“Since the growth in capital goods and intermediate goods has remained negative in January, it reflects continued overall weakness in investment in the economy. The continued decline in the mining sector needs to be addressed urgently,” said R.V. Kanoria, president, Federation of Indian Chambers of Commerce and Industry.

The director general of the Confederation of Indian Industry (CII), Chandrajit Banerjee said the central bank should lower interest rates to stimulate industrial output.

“While this is an improvement over the December 2011 figures, CII would not like to say that there is a clear turnaround in progress particularly since the sub-sectors which indicate investment activity are all performing very poorly, like capital goods at -1.5 percent, intermediate goods at -3.2 percent and basic goods at 1.6 percent,” Banerjee said.

“It is only appropriate that the interest rates are reduced by the RBI at the earliest opportunity and the current rates of excise are continued in the union budget to allow the manufacturing sector to recover from a full blown slowdown,” he said.

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