IIP growth rate slows down to 5.6%. Government to take confidence building measure

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IIP growth rate slows down to 5.6%
Industrial growth fell sharply for the month of June, it grew only 5.5%. In the previos month it grew by 6.3% and it was expected that the growth would be 8.6%.

The industrial output for the month of April was also revised downwards to 5.8% from 6.3%. Meanwhile, 80% of the IIP constitutes manufacturing, rose an annual 5.6%, Central Statistics Office said in a statement.

Industrial output grew 7.8% for the fiscal year (FY) 2010-11; this was less than the 10.5% which it had managed in FY 2009-10 in the previous fiscal year.

From April the industrial output data was adjusted to the new base year, 2004-05. With this the new series has started.

India's exports in May rose an annual 56.9 percent to $25.9 billion, government data showed this month. Infrastructure output grew 5.3 percent in May, slightly faster than an annual growth of 5.2 percent growth in April.

Also the Purchasing Managers' Index (PMI index), a key indicator used to gauge the health of the manufacturing sector, remained in expansionary territory. This was despite the fall to a nine-month low of 55.3 in June from 57.5 in May.

In its effort to fight inflation, the central bank of India, RBI increased key policy rates - repo and reverse repo from March 2010 for consecutive 10 times taking it to the level of 7.5%. This was done to contain the high inflation which cam eon the heels of economic recovery.

The core inflation for May was still high, at 9.06%. And the food inflation for the week was at 7.61% for the week ended June 25. 

Meanwhile experts believe that IIP will slow down further, as RBI may hike the interest rates to cool down inflation. And with the increase in diesel price there will be one more round of inflation which will force the RBI to act.

On the other hand, a slow down in the industry sector will be a cause for concern for the government, as falling production will not only affect the GDP but also effect the unemployment levels. Thus, the government will take some measures to improve industrial confidence. 

OneIndia Money

Read more about: iip, industry, inflation, gdp
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