(RTTNews) - Friday, the Central Statistical Organization of the Ministry of Statistics and Programme Implementation released India’s Index of Industrial Production for the month of May 2008. India’s industrial output during May slipped to six-year low, due to sluggish growth in manufacturing and power sectors, offset to some extent by mining sector.

In view of spiraling prices and heavy interest rates, the consumers spending on automobiles and manufactured products dwindled, which has also contributed to the fall in growth rate. The continued rise in inflation is also acting as a barrier and will weaken the manufacturing output further.

As per the data, the Index of Industrial Production during May 2008 slipped drastically to 3.8% from 10.6% for the same month last year. The growth rate also witnessed a downward trend from the revised growth figure of 6.22% for the month of April 2008.

During April this year, the growth rate in manufacturing sector, which has a weightage of 79.4%, dropped drastically to 5.3% from 11.8% in May 2007, while the growth rate of mining rose to 5.2% from 3.8% for the same month last year. The growth rate of the power sector plunged to 2.0% from 9.0% in May 2007.

In terms of industries, as many as 11 out of 17 industry groups have shown positive growth in May 2008, compared to the corresponding month of the previous year.

The industry group consisting of ‘Beverages, Tobacco and Related Products’ have shown the highest growth of 31.1%, followed by 12.3% in ‘Transport Equipment and Parts’ and 9.5% in ‘Basic Chemicals & Chemical Products (except products of Petroleum & Coal)’. On the other hand, the industry group ‘Wood and Wood Products, Furniture and Fixtures, have shown a negative growth of 30.7%, followed by 10.4% in ‘Rubber, Plastic, Petroleum and Coal Products’ and 9.0% in ‘Jute and Other Vegetables Fibre Textiles (except Cotton)’.

As per the use-based classification of IIP, the capital goods sector growth drastically slowed down to 2.5% in May over 22.4% a year-ago.

The IIP revealed that during April the growth of the basic goods also significantly declined to 3.0% from 10.3% in the corresponding month last year and that of intermediate goods declined to 1.2% from 8.8% for the same month a year-ago.

In May, the consumer durables sector witnessed a growth rate of 4.4%, compared to a negative growth of 0.7% in May 2007, while non-durables growth considerably slowed down to 8.1% from 12.1% for the same month a year-ago. Consequently, the overall consumer goods sector growth was 7.2%, slipped from 8.7% for the same month in the previous year.

For the first two months of this fiscal, the IIP growth was 5.0%, slowed down from 10.9% for the comparable period last year.

During April-May 2008, the manufacturing sector growth plunged to 5.3% from 11.8% in April-May 2007, while that of mining sector the growth rate increased to 5.6% from 3.2% for the first two months in fiscal 2008. The growth of power sector also plummeted significantly to 1.7% from 9.0% in April-May 2007.

Along with the Quick Estimates of IIP for may 2008, the indices for April 2008 have undergone the first revision and those for February 2008 have undergone the second and final revision in the light of the updated data received from the source agencies. The release further stated that the indices for March 2008 have under gone the first revision and has been communicated in June 2008 and these indices shall undergo final (second) revision in August 2008.

The sluggish growth in IIP comes after the Reserve Bank of India hiked repo rate to 8.50% and cash reserve ratio by 8.75% in two stages in a bid to reign in inflation. The apex bank is meeting on July 29 to review the monetary policy and indications are that the central bank may resort to further tightening of monetary measures.

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