Industrial output is expected to grow by 6.3 per cent in FY 09 as against the earlier estimates of 8.3 per cent, an economic think-tank said.
"Sharp downward revision in forecasts of electricity, textiles, cement, commercial vehicles, machinery, fertilisers, crude oil, petroleum products, man-made fibres and PVC pipes and tubes have pulled down our forecast for overall industrial production growth from 8.3 per cent to 6.3 per cent," the Centre for Monitoring Indian Economy (CMIE) said in its monthly report here.
The poor performance of the IIP in the first half and the new stress seen in select industries warrants a substantial downward revision in our forecast for FY 09, CMIE said.
Some industries, such as textiles face poor export demand and others like commercial vehicles face demand constraints arising out of high interest rates. Some industries also face adverse conditions because of fresh supply constraints, it said.
Petroleum refining faces supply constraints as scheduled commisioning of new capacities are postponed.
"We have scaled down our forecast in the fact of a stark contradiction. While the IIP grew by a meagre 4.9 per cent in the first half of FY 09, the inflation-adjusted sales of manufacturing companies recorded an excellent growth in output of 12 per cent," CMIE said.
"We always held the view that the quality of the IIP has deteriorated sharply in recent times. Our forecast, hitherto, were based on our understanding of the corporate world and with a hope that the official IIP would eventually correct itself to reflect what the corporate financial results imply," it said.
CMIE still believes that this would happen, but it would be too late to correct IIP for FY 09 sufficiently.
CMIE expects the mining sector to grow by 7.5 per cent in FY 09.
"Delay in the commencement of production from Reliance Industries' KG-DWN-98/3 block brings down our forecast for crude oil production," CMIE said.
Production of food and food products could decline by 0.5 per cent in FY 09 because of a sharp fall of 14.6 per cent expected in sugar production.
Sugar production would fall because of lower availability of sugarcane. Yet, the industry faces excess supplies, it said.
Paper and paper products industry is expected to report a meagre 2.2 per cent rise in production in FY 09 due to major capacity constraints. The industry is believed to be working at over 115 per cent capacity this year.
CMIE expects the chemical products group to record an 8.3 per cent growth in production in FY 09 as compared to 10.6 per cent growth in FY 08. The fertiliser production is expected to remain flat in FY 09 because of the unavailability of natural gas and basic raw materials.
Production of man-made fibres would also decline as low demand is making producers cut output, CMIE said.