Indian industry saw its output shrink for the first time in 15 years with a 0.4 per cent year-on-year decline in October, as the impact of the global economic downturn deepened in the country.
From a dazzling 12.2 per cent growth in October last year, industry recorded a negative growth of 0.4 per cent in
October this year, partly due to a dip of over 12 per cent in India's exports.
Policy makers said the fall was bigger than expected even as they exuded confidence that the 7th December stimulus package would arrest any further decline. Industrial output had last fallen in April 1993.
"These figures are more disappointing than what we expected," Prime Minister's Economic Council Chairman Suresh Tendulkar said.
Manufacturing, comprising around 80 per cent of the Index of Industrial Production, clocked a negative 1.2 per cent growth in the month from a whopping 13.8 per cent a year ago.
In fact, output in two of the four sectors that make up the index intermediate goods and consumer goods contracted to 3.7 per cent and 2.3 per cent, respectively, from a growth of 13.9 per cent and 13.7 per cent, respectively.
Within consumer durable goods, both segments consumer durables and consumer non-durables shrank by three per cent and two per cent, respectively.
Of the total 17 industries, captured in the IIP figure, as many as 10 recorded a negative growth and could have a
similar bearing on economic growth, given the fact that industry accounts for 29.4 per cent of GDP.
"Something more needs to be done by RBI in terms of CRR and repo rate cut. As far as more stimulus package by the government is concerned, there is not much of scope of additional measures. Government has done enough," Prime Minister Economic Advisory Council member Govinda Rao said.
RBI, which earlier this month cut its key rates and offered refinancing facility worth Rs 11,000 crore to create demand, has said that it might further revise downward GDP growth forecast from the present 7.5-8 per cent.
Observers feel that more steps are needed for stimulating the economy, as even the World Bank has pegged India's growth at 6.3 per cent for 2008 and 5.8 per cent in 2009.
RBI Governor D Subbarao too has said that the next fiscal could be even more painful. The latest industrial data does not capture the stimulus package announced by the government.
Besides manufacturing, mining growth fell by 2.8 per cent, from 5.1 per cent in October, 2007. Electricity, however, proved to be a consolation with growth rate rising to 4.4 per cent from 4.2 per cent.
Of the industry segments, leather and fur products shrunk the maximum by 18.1 per cent, followed by food and wood, furniture and fixtures by 14.4 per cent and cotton textiles by 9.6 per cent.
Seven industry which registered a growth, included beverages, tobacco, paper and paper products, printing and publishing, rubber and plastics and basic metals.
For the first seven months of this fiscal, industrial growth rate more than halved to 4.1 per cent from 9.9 per cent in the corresponding period a year ago.
The slowdown follows the impact of global financial crisis which has pushed economies of developed countries like
the US, the UK, Euro zones nations and Japan into recession.
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