Reserve Bank of India concerned over sharp decline in factory output growth

Saturday, November 13, 2010

MUMBAI - Expressing concern over the sharp decline in factory output growth, Reserve Bank of India (RBI) Deputy Governor Subir Gokarn on Saturday said the latest numbers are alarming.

Subir Gokarn, however, added that the other key indicators such as the corporate earnings and tax collection numbers show that the recovery process is on track, though they may not be as explosive as it was some quarters back.

“The IIP (index of industrial production) is suggesting somewhat of a deceleration (in the growth process). 5.5 (per cent) in August and 4.4 per cent in September, a lot of that deceleration is coming in from a sharp decline in capital goods, which, of course, must raise some concerns,” he told a Chief Financial Officers (CFO) Summit organised by the Indian Industries here today.

“Whether this deceleration reflects a slowdown in investment activities? If that is the case, is it reflecting the cost of funding, is it reflecting weaker expectations of future growth or a combination of the two? All of these is a matter of concern,” he added.

Industrial output growth in September slumped to a 16-month low of 4.4 percent, an unexpected slowdown that could make policymaking tougher for the RBI, which had said it wanted to hold off from further rate increases for the next three months at least.

The use-based classification of Index of Industrial Production (IIP) showed capital goods contracted by 4.2 percent and consumer durables slowed to 10.9 percent during the month. (ANI)

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