Industrial production slows to 2.7%

Showing signs of turnaround, industrial production grew by 2.7 per cent in August, reversing the trend of contraction witnessed during the previous two months.

However, the overall factory output, as measured by the Index of Industrial Production (IIP), grew at a slower pace than 3.4 per cent recorded in August 2011.

On sequential basis, IIP contracted by (-) 0.18 per cent in July and (-) 1.8 per cent in June.

Industrial output during April-August, as per official data released today, was 0.4 per cent down from 5.6 per cent in the same period in 2011-12.

Manufacturing, which accounts for the bulk of industrial production, rose 2.9 per cent in August, lower than 3.9 per cent from a year ago. The growth for the April-August was flat, as against 6 per cent growth in the year-ago period.

Commenting on the data, PMEAC Chairman C Rangarajan said, "IIP numbers indicate there is some turnaround as far as manufacturing sector is concerned. I do expect in coming months the growth rate will further pick up and for year as a whole we can still see manufacturing growth at 3-4 per cent".

The IIP number, which has turned around in August, is also expected to respond to the slew on reforms initiatives taken by government recently.

"The IIP numbers have been very volatile and the lower base is resulting in these numbers being on the higher side.

The inflation is high and it would be difficult for RBI to cut interest rates," Kassa Group Director Siddharth Shankar said.

The RBI is scheduled to come out with the second quarter monetary policy review on October 30 and the September inflation numbers are scheduled on Monday. Wholesale Price Index-based inflation in August stood at 7.55 per cent.

As per today's data, retail inflation moderated to 9.73 per cent in September, from 10.03 per cent in August.

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