Dip in factory output, low inflation raise rate cut clamour

In a fresh setback, industrial production saw the sharpest contraction in three years of 4.2 per cent in October, though retail inflation dipped to 4.3 per cent, putting pressure on Reserve Bank of India (RBI) to cut rate to boost growth.

Factory output as measured by Index of Industrial Production (IIP) declined due to contraction in manufacturing, capital goods and consumer items.

"It not only reflects slowdown in investments but also the deep rooted slackness in consumer demand which requires bringing down the interest rates urgently," said Ficci President Sidharth Birla while commenting on IIP data.

"It would also need faster implementation of government's intentions to introduce reforms in which states have major role to play," he added.

The factory output for the month under review was the lowest since October, 2011 when it had recorded a contraction of 4.74 per cent.

IIP had declined by 1.2 per cent in October last year. For September, it was revised to 2.8 per cent from the provisional estimates of 2.5 per cent released last month, according to the official data.

For the April-October period, IIP is up 1.9 per cent, as against 0.2 per cent in same period of last fiscal.

Manufacturing output, which constitutes over 75 per cent of the index, contracted by 7.6 per cent in October, compared to a dip of 1.3 per cent in same month last. For April- October, the sector saw an output growth of 0.7 per cent, compared to a contraction 0.1 per cent in the year-ago period.

The production of capital goods, a barometer of demand, declined by 2.3 per cent in October, as against a growth of 2.5 per cent in same month of last year.

For the April-October period, capital goods output is up 4.8 per cent, as against a dip of 0.2 per cent a year ago.

Meanwhile, according to the Consumer Price Index data, cheaper food items helped retail inflation drop to a new low of 4.38 per cent in November - the fifth consecutive month of decline.