Bhubaneswar: According to the figures released on Monday, the Industrial Production of India fell by 5.1 % as compared to growth of 11.3% in October 2010, due to the soaring interest rates, inflation, global slowdown and most importantly poor performance of the manufacturing and mining sectors This seems to be a big blow for the Indian Government, that is already struggling to combat a slide in the economy.
This is the first decline since more than two years which has confirmed that there will be a further slow down in the economy.
Last week the Government had cut its annual growth forecast for the current fiscal year to between 7.1% from 7.8%, from 9 percent estimated in February.
The output of the manufacturing sector, which constitutes 75 percent of the Index of Industrial Production (IIP), dropped by 6.0 percent in October, compared with a growth of 12.3 percent in the same month of 2010, while mining fell by 7.2 percent, compared with a growth of 6.1 percent in October last year.
The output of the capital goods sector dropped by 25%, compared to the growth of 21% in October last year.
However the electricity sector is the only one to have witnessed an increase.
Though a decline in the index was widely expected, the magnitude took everyone by surprise.
Further more the rupee made a new lifetime low of 52.835 against the dollar, a nearly 13 percent drop in the rupee this year which adds to the sense of crisis and complicates the central bank’s inflation-fighting by making imports more expensive.
Although the RBI had raised its key lending rate by a total of 375 basis points since March 2010 to combat inflation that has stayed above 9 percent for nearly a year, it is not expected to begin cutting interest rates at its mid-quarter review.