Industrial output growth slumped to 1.7 per cent in May from 8 per cent a year-ago due to poor performance of mining and manufacturing, and may put pressure on the RBI to cut interest rate in its policy next month. The factory output growth, measured on the Index of Industrial Production (IIP), for April-May period decelerated to 2.3 per cent from 7.3 per cent in the same period last fiscal, as per the data released by the Central Statistics Office. The data further revealed that output of the capital goods segment, considered as key indicator of investment, shrunk by 3.9 per cent compared to a high growth of 13.9 per cent recorded in May 2016. The consumer durables segment too witnessed a decline. While mining sector output declined by 0.9 per cent in May against 5.7 per cent growth in the year-ago month, the growth of manufacturing sector slowed to 1.2 per cent from 8.6 per cent in the same month last year.
However, electricity generation expanded by 8.7 per cent in May as against 6.1 per cent growth in the corresponding period last year. The Reserve Bank, which is slated to announce its bi-monthly monetary policy later next month, has kept the interest rate on hold citing risks to inflation.
The government has been pressing on the RBI for a cut in interest rates to increase private investment. Industry too has been persistently demanding rate cut to boost investments.