IIP slips to disappointing 2% in April; raises rate cut hope

Showing no signs of recovery, the industrial output slipped further to a 'disappointing' 2 per cent in April increasing the clamour for rate cut by the RBI and speedy clearances of projects to boost investment.
The Index of Industrial Production (IIP) in April has moderated from 3.4 per cent in March on account of dismal performance of manufacturing and mining sectors, although it is better compared to a contraction of 1.3 per cent in the same month of last fiscal.
Describing the IIP in April as "disappointing", Planning Commission Deputy Chairman Montek Singh Ahluwalia said: "The growth rate that has come out today is low...There is a slight upturn, but its not strong enough."

The decline in factory output has mainly been on account of dismal performance of key sectors like manufacturing, mining, power and capital goods sectors.
Manufacturing sector, which constitutes over 75 per cent of the index, grew by a meagre 2.8 per cent in April. In the year-ago period, however, it had declined by 1.8 per cent.
Power generation grew by just 0.7 per cent in April this year compared to a growth of 4.6 per cent in same month last year. The mining sector output contracted by 3 per cent in April this year compared to a decline in the production by 2.8 per cent in April 2012.

Capital goods output saw a growth of just 1 per cent in April, compared to a decline in production by 21.5 per cent in the year-ago period.

Worried over slow growth, CII Director General Chandrajit Banerjee pressed for an "accommodative" monetary policy from the Reserve Bank to stimulate investment.
Alhuwalia too said that "RBI is watching the situation ...And I hope that they will make a sensible decision".
Meanwhile, decline in wholesale as well as retail inflation has raised the hope of rate cut by the central bank which is scheduled to announce mid-quarter monetary policy review on June 17.