Industry goes back to 2002

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Tuesday , May 13, 2008 at 0043 hrs The country’s industrial output nose-dived to a 73-month low of 3% in March 2008, compared with the 14.8% in March 2007. The sharp drop in IIP figures could push down the GDP growth rate for 2007-08 to 8% from the government’s projection of above 8.5%.

But Planning Commission deputy chairman Montek Singh Ahluwalia said: “There was an estimate of 8-8.5%. The lower end of the range is acceptable.”

C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council (EAC), said, “In January, the Council had projected the GDP growth at 8.5%, but now I would say that it could be between 8 and 8.5%.”

The government put up a brave front on industrial production, pointing out that the overall industrial output data for 2007-08 was not as bad as March. Industrial output grew by 8.1% in 2007-08, down from 11.6% in 2006-07, while manufacturing growth fell to 8.6% from 12.5% last fiscal.

While March saw growth in mining and electricity slowed down by more than a half from a year ago, growth in the manufacturing sector, which comprises close to 80% of index for industrial production (IIP), plunged to a measly 2.9% against a high of 16% in March 2007. Again, while all use-based indices dipped sharply, consumer durables and goods saw a negative growth of 2.1% and 0.1%, respectively. Industrial production for February 2008 had shown a 8.6% growth and the last time growth had slipped below 3% was back in February 2002 (2.4%).

Following the release of IIP figures, the rupee, which was under pressure from rising oil prices and a weakening stock market, depreciated to 41.68 per dollar from 41.38. The Bombay Stock Exchange, which had been slightly positive before the data, dropped 1.1% before paring its losses.

Apart from moderating GDP growth, experts expect a pause in further tightening of monetary policy by the Reserve Bank of India to tame inflation, especially since a strong rupee and stricter monetary policy have cut demand. Admitting that the IIP numbers were much lower than expected, Soumitra Chaudhuri, a member of Prime Minister’s EAC, said it could be a ‘blip.’