Poor manufacturing hits industrial growth

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The country's industrial output growth slowed down to 7.1 per cent in July this year from 13.2 per cent in the same month a year ago as higher interest rates forced consumers to cut spending on household items and automobiles, adversely affecting the manufacturing sector.

As per the quick estimates of Index of Industrial Production (IIP) released by the government today, growth in the manufacturing sector came down to 7.2 per cent during the month as compared to 14.3 per cent in July 2006.

Mining and electricity sector also witnessed deceleration in output. During the month, mining production grew at a slower rate of 4.9 per cent from 5.1 per cent last year, while electricity generation was down to 7.5 per cent as against 8.9 per cent in the corresponding month last year.

Manufacturing sector, such as automobiles, witnessed a slow down as the Reserve Bank has been following a tight monetary policy for the past few months that increased interest rates. This, in turn, has curbed consumer spending.

The output of consumer durables such as refrigerators and television fell 3.2 per cent against a growth of 16.1 per cent in July 2006. Similarly, production of consumer non-durables decelerated to 8.4 per cent from 17.1 per cent a year ago.

The growth of consumer goods sector in July slowed down to 5.3 per cent from 16.8 per cent last year. According to the Society of Indian Automobile Manufacturers, automobile sales in August has also fallen 1.67 per cent. Total automobile sales in the country slipped 4.98 per cent in April-August.

Poor performance in July also pushed down the cumulative growth in industrial production during April-July 2007 to 9.6 per cent as compared to 11.1 per cent in the corresponding period last fiscal.

During the four-month period, manufacturing sector grew by 10.3 per cent as against 12.3 per cent, while mining sector growth rate slipped to 3.1 per cent from 4 per cent a year ago. Power generation, however, rose by 8.1 per cent as against 6.1 per cent in the same period last year.

As per use-based classification, the output of basic goods during July went up by 9 per cent (10 per cent July 2006), capital goods by 12.9 per cent (18.3 per cent) and intermediate goods by 4.7 per cent (10.7 per cent).