IIP contracts by 0.4 per cent in Sept, India Inc seeks rate cut by RBI

NEW DELHI: Belying hopes of an early economic revival, industrial production contracted by 0.4 per cent in September on account of dismal performance of manufacturing and capital goods sectors, prompting India Inc to press for interest rate cut by the Reserve Bank.

The industrial output growth rate turned negative in September after showing 2.3 per cent growth in the previous month. The Index of Industrial Production ( IIP) was at 2.5 per cent in the corresponding period of last year.

Terming the decline in the Index of Industrial Production (IIP) as "very disappointing", Planing Commission Deputy Chairman Montek Singh Ahluwalia said the data did not reflect the impact of recent reforms initiatives which would manifest in the later part of the fiscal.

Expressing similar views, Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan said it was disappointing to see IIP slipping into negative after showing signs of improvement in August and hoped that things would improve in the coming months.

Meanwhile, the Industry chamber CII stepped up its demand for 0.5 per cent cut in interest rate by the RBI saying "a complete sacrifice of growth is not in the interest of the economy".

RBI has refrained from cutting interest rate fearing it could fuel inflation. The central bank is scheduled to come out with its next mid-quarter policy on December 18.

The IIP data suggests that output of manufacturing sector, which constitutes over 75 per cent of the index, contracted by 1.5 per cent in September, as against a growth of 3.1 per cent in the same month last year.

Industrial output in the April-September period this fiscal stood at 0.1 per cent, down from 5.1 per cent in the same period of 2011-12.