FM unhappy with IIP numbers; blames global slowdown for the fall

Finance Minister Pranab Mukherjee has expressed his ‘unhappiness’ over the contraction of the industrial output numbers. In his view the slowdown in global demand and investment activity has impacted the IIP numbers. Also the effect of lowering of interest rates by the RBI will take some time for interest costs to come down.

As per official data the Index of Industrial Production (IIP) has contracted to a five year low of -3.5% in the month of March. Though a low number was expected, a contraction to this degree took everyone by surprise. On an annual basis, the IIP grew by a meager 2.8%, as against 8.2% in the 2010-11 fiscal.

Output of the manufacturing sector, which constitutes over 75% of the index, contracted by 4.4% in March, compared to growth of 11% in March 2011 and 4% growth in February. Output in capital goods sector contracted by 21.3% as against a growth of 14.5% in the same month last year.

The RBI in its efforts to push growth had cut interest rates by 50 basis points in its last monetary policy. Commerce and Industry Minister Anand Sharma has also expressed his ‘deep concern’ over the numbers and has stated that he will be calling a meeting of exporters to discuss the situation. Sharma has also urged the RBI to ensure credit at affordable rates for domestic industry and dollar credit for exporters.