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IIP growth plunges in Aug
13 October 2010: The annual growth rate of India's industrial output dipped to a single-digit level at 5.6 per cent in August 2010 from the revised figure of over 15 per cent in July 2010 primarily due to lower demand for capital goods and consumer nondurables in the month under review. This is the slowest pace of industrial growth in 15 months, and is expected to ease pressure on the RBI to raise key rates next month. But a final cue for that is expected to be provided by the monthly inflation figures for September, which is likely to come in shortly.
Industry raised a chorus against a further hike in RBI's key policy rates when the central bank reviews its policy on 2 November 2010. Industries across the board felt the deceleration was owing to the tight monetary policy stance, which has pushed up interest rates for both corporates and retail customers. This year, the RBI has increased policy rates five times, aggregating 125 percentage points, to curb inflation. The central bank's key short-term lending rate stands at 6 per cent and borrowing at 5 per cent. But some analysts saw demand staging a comeback as the festival season begins. The numbers also triggered a huge sale on the bourses as investors pulled down the sensex by 137 points .
Production of capital goods like construction and earthmoving equipment dropped to a negative 2.6 per cent Y-O-Y after clocking a rise of 9.2 per cent in the previous corresponding period. Production of non-durables fell 1.2 per cent, reflecting the impact of inflation on consumer spending.
Source: Times of India