INDUSTRIAL GROWTH PLUNGED TO 3.8%

Industrial Growth Chart

• Industrial growth plunged to 3.8 per cent in May, as compared to 10.6 per cent a year-ago, due to poor showing of manufacturing and electricity sector.

• Index of Industrial Production (IIP) grew by just 5 per cent in the first two months of this fiscal, against 10.9 per cent during the same period last year.

• India's inflation rate rose to 11.89 per cent due to higher prices of essential food items and manufactured products

• Policymakers are turning to the rain gods hoping that a good monsoon for higher agricultural growth and lower food prices

Industrial output which is measured by Index of Industrial Production (IIP) grew by just 5 per cent in the first two months of this fiscal, against 10.9 per cent during the same period last year. The deceleration in industrial output does not augur well for overall economic growth in the first two months. Industrial growth plunged to 3.8 per cent in May, as compared to 10.6 per cent a year-ago, due to poor showing of manufacturing and electricity sector.

Raising interest cost led to drastic deceleration in manufacturing growth to 3.9 per cent in May, compared to 11.3 per cent in a year-ago period.

Manufacturing has a weight of over 79 per cent in IIP. However, the positive point is consumer durables growth rose to 4.4 per cent, against negative 0.7 per cent. Only mining output grew by 5.2 per cent, against 3.8 per cent.

Electricity sector, which is having 10.17 per cent weight in the Index for Industrial Production (IIP) has registered a growth of 2 per cent in May this year as against 9.3 per cent in the same month last year.

The petroleum refinery output growth became stagnant with a 0.1 per cent output growth when compared with 14.9 per cent in May last year.

Coal production grew from 0.5 per cent in May last year to 8.3 in May this year and crude oil output also grew by 3.2 per cent from its negative rate.

India's inflation rate rose to 11.89 per cent due to higher prices of essential food items and manufactured products. Inflation was only 4.42 per cent in the corresponding week a year ago and is now at a 13-year high since such inflation figures were last recorded in May, 1995.

Mr Rakesh Mohan, Deputy Governor of RBI said that monsoon situation seems to be as the meteorological dept has predicted. The IMD has forecast normal monsoon. As of now the expectation of the monsoon has been encouraging.

Policymakers are turning to the rain gods hoping that a good monsoon for higher agricultural growth and lower food prices to reduce the inflation rate.