Industry growth slackens
New Delhi, Feb. 11: India’s factory output grew by just 1.6 per cent in December raising concerns about whether the country was heading towards an industrial slowdown. This is the lowest growth in the last 20 months. In November also the industrial output had grown by a mere 3.62 per cent.
The capital goods and consumer non-durables contracted in December pulling down the overall industrial production growth number.
The capital goods contracted by 13.7 per cent raising fears that companies may be putting off their capacity expansion due to the rise in the cost of capital as a result of the monetary tightening.
However, economists point out that the capital goods data has been very erratic during the year rising as high as 65 per cent in July.
“There has been some impact as the corporate capital cost went up. The bankers will tell you it is not that the corporates have put their capex on hold but there has been some pull down,” said an economist with a brokerage firm.
The contraction in the non-durables sector has been attributed to high inflation which has shrunk the household budget.
However, finance minister, Mr Pranab Mukherjee said that the monthly numbers do not reflect the correct picture of the economy. “IIP numbers are very unfortunate and it is disappointing but it was on expected lines as it was on a yearly basis. Monthly and weekly numbers do not reflect the correct picture.”
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