High interest rates, weak consumer demand and the slump in overall investment seems to be taking its toll on industrial growth. The Index of
Industrial Production (IIP) growth went down sharply to 0.6 per cent in August as compared to the corresponding month last year. It was also much lower than the revised
2.75 per cent growth in July .
The cumulative growth in IIP in the first five months of 2013/14 (over the corresponding period last year) remained flat at 0.1 per cent.
Of the three sectors on which the IIP is based, mining and manufacturing contracted by 0.2 per cent and 0.1 per cent respectively as compared to August 2012. The electricity sector grew by 7.2 per cent.
The numbers did not come as a surprise, especially after the new RBI governor Raghuram Rajan raised the repo rate by 25 basis points (to 7.5 per cent) soon after taking up his new job.
The repo rate was raised in a bid to rein in inflation, but experts believe the step has dampened the corporate sentiments further which, in turn, affected the investment climate and industrial growth. Inflation rose for the third consecutive month in August to 6.1 per cent, fueled by an 18.8 per cent rise in food inflation.
Production of both capital goods - a barometer of investments in the economy - and consumer goods, have shown negative growth. Some other items which showed decline include rice, air conditioners, radios, TVs and communications equipments, gems and jewellery and telephone instruments (including mobile phones).
The disappointing set of numbers have come at a time when the country is staring at its worst economic performance in a decade. GDP growth was five per cent in 2012/13.
However, consumer demand is expected to rise in the near future, especially in rural areas, as agricultural output will be much higher this year due to a strong monsoon.
Besides, the August figures are at least better than those of May and June this year when the IIP contracted by more than two per cent.
Special 
