August IIP growth at 4.1: govt

Industrial growth slowed on account of poor performance of manufacturing and mining sector.

Industrial output remained subdued for the second consecutive month in August,registering growth of just 4.1 per cent,but the Reserve Bank of India RBI may not pause with its interest rate hike strategy,with inflation ruling much above comfort levels.

The August figure is a tad better than the 3.8 per cent growth recorded in July revised upward from 3.3 per cent and 4.5 per cent in the corresponding period last year.

Factory output,as measured by the Index of Industrial Production IIP,however,stood at 5.6 per cent in the April-August period,as against 8.7 per cent in the same period last year,according to official data released today.

In August,the manufacturing sector 8212; which constitutes over 75 per cent of the index 8212; logged 4.5 per cent growth,as against 4.7 per cent in the same month last year.

However,it is unlikely that the RBI will pause with its rate hike strategy on account of the slowdown in industrial output growth. The RBI has already hiked rates 12 times since March,2010,to control inflation,which stood at 9.8 per cent in August.

Even RBI Deputy Governor Subir Gokarn said the central bank8217;s decision to further hike rates will depend on the inflationary situation.

The economic slowdown has impacted countries globally,especially Western nations. But India is still somewhat better off,with the country growing by 7.7 per cent in the April-June period. The government expects economic growth to be around 8.5 per cent in the current fiscal.

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Even though there has been a demand slowdown in the US and Europe,India8217;s exports maintained their growth momentum during April-September,increasing by 52.1 per cent to USD 160 billion.

As per government data,mining output declined by 3.4 per cent in August,as against a growth of 5.9 per cent in the corresponding month of the previous year.

Growth in capital goods production slowed to 3.9 per cent in August,in comparison to a growth of 4.7 per cent in the same month of 2010.

8220;Growth slowdown of basic goods sector and lacklustre growth of intermediate goods sector are pointing toward weak industrial growth scenario in the near future,8221; Fitch Ratings Director Devendra Kumar Pant said.

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Reacting to the IIP figures,industry chamber Ficci said that investment demand has been affected in the last few months on account of monetary tightening measures.

8220;We expect the growth in industrial sector and investments to be low in coming months also,as the impact of the rising cost of credit would continue,8221; Ficci said.

During August,2011,electricity production exhibited a sharp improvement,growing by 9.5 per cent,as against a mere 1 per cent growth in August,2010.

On the other hand,consumer durables output growth slowed to 4.6 per cent in August,compared to a growth of 8.1 per cent in the previous year.

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FMCG production also grew by 2.9 per cent in August,compared to growth of 1.8 per cent in the same month last year.

Growth in overall output of consumer goods also slowed down to 3.7 per cent in August this year,compared to a growth of 4.6 per cent in August,2010.