India's Industrial output registered a negative growth of 5.1 per cent in October, lowest in over two years, mainly due to rising interest rate, high prices and global uncertainties, a development that may prompt the Reserve Bank of India (RBI) to ease the interest rate.
The industrial output which had grown by 11.3 per cent in October last year showed the sharpest decline in last over two years when data released by the government on Monday said it fell 5.1 per cent in October 2011.
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Cost increase hit companies hard The decline in industrial production has mainly been on account of poor performance of the
manufacturing and mining sectors, resulting from the twin impact of high interest rate and global slowdown.
In view of the negative factory output and moderation in inflation, especially food prices, the RBI may lower the key policy rates - which it has increased for 13 times since March 2010 - in its monetary policy review on December 16.
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India needs to focus on high-end manufacturingDescribing the industrial output numbers as disappointing, C Rangarajan, chairman of Prime Minister's Economic Advisory Council (PMEAC), said, "Somewhat lower growth in industrial production was expected, but not a negative growth.
"We certainly need to look at all our actions in order to provide situation in which the industrial growth rate is not only in the positive but it is respectably high."
As regards the monetary policy, Rangarajan said, the
Reserve Bank will have to look at what is happening to the inflationary trend. "If the inflation trend indicates a definite decline, then perhaps (reversal) of policy actions can be thought of", he added.
Following release of the industrial output data, the Bombay Stock Exchange (BSE) Sensex in the late afternoon trade declined by about 350 points.
--With PTI inputs
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