'Sort of slowdown' in industry growth: RBI

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SME Times News Bureau | 12 May, 2012
The 3.5 percent contraction in the Index of Industrial Production (IIP) data for March indicates that there is "a sort of slowdown, which is a concern", but the figures may be "a little inadequate", Reserve Bank of India (RBI) Deputy Governor Subir Gokarn said Friday.

"We have been raising concern about the IIP data for some time though as a single indicator of growth activity, it is perhaps a little inadequate at this time. So we take a number of other variables into account such as the PMI (purchasing managers index), our own surveys and corporate analysis, which suggest that there is a sort of slowdown," Gokaran told reporters on the margins of an industry event in Bangalore.

According to the government data released earlier in the day, the industrial output shrunk 3.5 percent in March of last fiscal (2011-12) due to poor show of manufacturing and mining sectors, dampening hopes of an early revival of growth.

The data by the Central Statistics Office also showed that the average industrial output growth for last fiscal (FY 2012) fell to 2.8 percent as compared to 8.2 percent in the previous fiscal (2010-11).

The unexpected contraction was also the first in the factory output since October 2011, when it shrank 4.7 percent. It was 4.1 percent in February 2012.

"If the contraction suggests a much deeper slowdown or not is something I can not confirm now. We need to go back and analyse and place in the perspective of other indicators that we watch," Gokarn said after an interactive session with members of the Confederation of Indian Industry (CII) southern region here.

Noting that the interest rate cycle had turned and its progress would depend on the overall assessment of growth, Gokarn said the outlook on inflation, however, depended on a number of different variables than just the IIP data.

"There are other factors and other indicators as well. We take a consolidated and holistic view of all of this at our next policy review meeting on June 18-19 and quarterly review in July. As we build up to these events, we will be taking all this evidence," he said.

Asked if the slowdown would continue, Gokarn said the central bank's outlook for this fiscal was a mild recovery of growth.

"Our projection in the April policy indicated that the (GDP) growth for 2012-13 would be at 7.5 percent. We do expect some bottoming out of this process over the course of the year," he added.