ibnlive » Business

Nov 13, 2008 at 06:49pm IST

IIP numbers for September up to 4.8 per cent

New Delhi: Industrial production stood at a mere 1.4 per cent in August but it was back to an encouraging 4.8 per cent in September taking just a month to recover lead by a healthy 4.8 per cent growth in manufacturing and capital goods.

Manufacturing and capital goods grew by 18.8 per cent against 20.9 per cent a year ago. Markets reacted positively to the numbers which were in line with expectations.

Senior Economist with ABN AMRO Bank, Gaurav Kapur says, "I think it is certainly better than what I had expected and I had expected somewhere around 3.5 to 4 per cent."

But celebrations could be shortlived as slowdown in several important sectors start to take effect. Auto biggies - led by the Tata Motors and Ashok Leyland - have already cut production and announced shutdowns to save money, so the next few months could see production fall.

Standard Chartered Bank's Anubhuti Sahay says, "If we talk about the month going forth, then yes, the situation looks a little bit more challenging. As we mentioned, we have seen a lot of scaling back in production from various sectors and that will impinge negatively on the industrial production going forth."

Companies are already putting expansion plans on hold due to the global liquidity crunch. Many experts including the Prime Minister's Economic Advisor are looking at the Reserve Bank of India to come out with more measures to give a boost to the economy.

Gaurav Kapur says, "RBI is moving from a tight liquidity scenario to easy liquidity conditions. Reverse repo rate becomes the operational rate so at some stage, one would have to consider a reverse repo cut as well and I think there is room for further rate cuts in the second half of the year as the growth numbers and the IIP numbers begin to show a bleaker scenario."

The slowdown in exports may add to the worries. In October, exports declined 15 per cent for the first time since 2003 as demands in the US and Europe dipped.