IIP growth plunges to 5.6% in Aug

NEW DELHI: The annual growth rate of India's industrial output dipped to a single-digit level at 5.6% in August from the revised figure of over 15% in July primarily due to lower demand for capital goods and consumer nondurables in the month under review. This is the slowest pace of industrial growth in 15 months, and is expected to ease pressure on the RBI to raise key rates next month. But a final cue for that is expected to be provided by the monthly inflation figures for September, which is likely to come in on Friday. A "disappointed" FM Pranab Mukherjee said on Tuesdayafter the data was released that the nation was still on growth path. "( Thetrend is) a little disappointing . Let us see how it fares in annualisedterms... (but) Indian economy is on the path of robust growth led by increasedinvestment and capital inflows, stronger industrial output and rising aggregatedemand," he said. Industry raised a chorus against a further hike inRBI's key policy rates when the central bank reviews its policy on November 2.Industries across the board felt the deceleration was owing to the tightmonetary policy stance, which has pushed up interest rates for both corporatesand retail customers. This year, the RBI has increased policy rates five times,aggregating 125 percentage points, to curb inflation. The central bank's keyshort-term lending rate stands at 6% and borrowing at 5%. But some analysts sawdemand staging a comeback as the festival season begins. The numbers alsotriggered a huge sale on the bourses as investors pulled down the sensex by 137points . Production of capital goods like construction andearthmoving equipment dropped to a negative 2.6% year-on-year after clocking arise of 9.2% in the previous corresponding period. Production of non-durablesfell 1.2%, reflecting the impact of inflation on consumer spending.