INDUSTRIAL output growth for July 2007 has seen a sharp decline to 7.1% from 13.2% in July last year. The annual growth is at its lowest since last October, when it had dipped to 4.4%. Growth figures have been consistently at sub-10% levels since the last three months with credit squeeze slowing down manufacturing and consumer spend.
Poor performance in July also pushed down the cumulative growth in industrial production during April-July 2007 to 9.6% as compared to 11.1% in the corresponding period last fiscal.
The trend may continue, say economists who have forecast industrial growth to be in single digits this year. Though the government appears optimistic with Prime Minister’s Economic Advisory Council chairman C Rangarajan saying he expects the economy to remain on track for another year.
As per the quick estimates of Index of Industrial Production (IIP) released by the government on Wednesday, growth in the manufacturing sector was down to 7.2% in July this year compared to 14.3% in July 2006.
Manufacturing contributes about 15% to gross domestic product and nearly 80% to industrial output.
Besides the high base effect, it is the strong rupee impact and high interest rate that have led to the steep decline in output. To some extent, this could also be the reason behind the slowdown experienced by export-oriented companies in IT, textiles and pharma sectors, said Research and Information System (RIS) director-general Nagesh Kumar. JNU professor Manoj Pant said since the housing sector had witnessed a decline in demand due to high interest rates, construction, steel and cement sectors have slowed down.