THE country’s industrial output grew 11.1% in May 2007 compared to May 2006, a drop from 12.4% in April 2007 as growth in the manufacturing sector declined to 11.9% from 15.1% in the previous month. The slow down in the manufacturing sector was on account of the decline in growth rate in the consumer goods category, as high interest rates continue to impact consumer demand. Production of consumer goods grew by 9.8% in May compared to 17.7% in April. Growth in the consumer durables sector, which includes white goods and automobiles, decreased from 5.3% in April to 2.6% in May. The corresponding figure for May last year was 17.5%. The various monetary tightening measures on account of exchange rates, interest rates and liquidity have had a bearing on the demand in this sector. IIP figures for April 2007 were revised downwards, showing a final growth rate of 12.4% rather than 13.6% as released by the government last month. Economists predict some moderation in the industrial production growth rates in the coming months. “Growth in industrial output is expected to moderate in the second half of the fiscal and will hover at around 9.5% at the end of the fiscal year,” HDFC chief economist Abheek Barua said. In spite of the slow down in the Index of Industrial Production (IIP), demand for investment goods continues to remain high. While growth in the capital goods sector was 17.7% in April, the sector grew by 22.9% in May. Growth rate in the machinery and equipment sector was 22.8%. “Even though there has been a dramatic decrease in the interest-sensitive consumer goods category, shocks from the high interest rates have not slowed down corporate investment as they are relying on overseas borrowing and their foreign reserves,” Crisil principal economist DK Joshi said. Makers of two-wheelers have cut production in response to falling demand. In terms of industries, 14 out of the 17 industry groups have shown positive growth during May.