Industrial output drops; India Inc seeks interest cut

The dismal factory output, as measured by the Index of Industrial Production (IIP) for March, 2012 compares with an impressive 9.4 per cent growth a year ago.

IIP contraction in March was also surprising because it expanded by 4.1 per cent just a month ago in February.

On an annual basis, the index grew by a meagre 2.8 per cent as against 8.2 per cent in the 2010-11 fiscal.

The last time the industrial output declined was in October 2011 - by 4.98 per cent.

The capital goods segment which reflects new investment took the maximum hit dropping by 21.3 per cent in March,2012, as per the data released today by the Central Statistical Organisation (CSO). It had expanded by 14.5 per cent in the corresponding period last fiscal.

Overall, the manufacturing segment which accounts for 75 per cent of the IIP, contracted by 4.4 per cent on slackening exports and poor demand resulting from high interest cost of raw material and borrowing. The sector had shown an 11 per cent growth a year ago.

While the numbers disappointed the government, the industry joined the chorus for cut in interest rates.

"The IIP figures are disappointing... Domestic investment recovery remains frail. It will take some more time for interest cost to come down," Finance Minister Pranab Mukherjee said.

Commerce and Industry Minister Anand Sharma said after meeting exporters next week, "the government would intervene in the sectors which require support".

Weak IIP performance further dampened the stock market with the Sensex falling by 127 points. MORE