Industrial growth went back to a strong slowdown mode in December after Diwali sales showed some signs of an uptick in the previous month.
Industrial output growth moderated to 1.8% in December from 5.9% in November, the the latest index of industrial production (IIP) data released on Friday showed.
Pulled down by a slowing manufacturing output, which grew by a similar 1.8% in December, the data confirmed fears about a slowdown.
The sectoral composition continued to show a contraction in mining output largely due to a fall in oil and gas production.
Capital goods output continued to remain weak — it contracted by -16.5% in December — mirroring investment demand."IIP is disappointing... I hope from the next couple of months it will start improving," said Pranab Mukherjee, finance minister.
Amid signs of a sputtering economy, the industry rachetted up their demand for cheaper interest rates and friendlier fiscal policies to boost growth.
"The coming budget should not look at any increase in the excise duty for the manufacturing sector and the government should retain the current levels of duty," said RV Kanoria, president, Federation of Indian Chambers of Commerce and Industry (FICCI).
"Also, RBI should bring down the interest rates" he added.
Last month, the Reserve Bank of India slashed the cash reserve ratio (CRR) — the proportion of deposits banks have to park with the central bank — by 0.50 percentage points to 5.5%, to add Rs 32,000 crore to the pool of resources that banks can lend to final borrowers.
The move is likely to lead to lower interest rates on loans to individual and corporate borrowers.