July industrial output hits a 21-month low | business | Hindustan Times
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July industrial output hits a 21-month low

business Updated: Sep 13, 2011 01:36 IST
HT Correspondent

The industrial output figure grew by 3.3% in July, the slowest in 21 months, presenting India’s policy-makers with a dilemma, as the string of measures to cool prices failed to tame inflation but eroded growth in the broader economy.

The Bombay Stock Exchange’s benchmark index, the Sensex, plunged to a two-week low of 16,501.7 points — down 365 points, or 2.2 % — on concerns over the weak industrial output growth and worries over the compounding debt problems in European economies such as Greece.

Output in the capital goods sector was the worst hit-contracting by 15.2% — a sign that costlier borrowing and raw material costs are prompting companies to defer expansion. http://www.hindustantimes.com/images/HTPopups/130911/13_09_pg01b.jpg

The slower growth could result in fewer job openings and lower salary hikes as corporations hold back investment.

The government admitted that numbers were a reflection of a slowdown. “It (IIP numbers are) very disappointing... It is a sign of slowdown,” chief economic adviser Kaushik Basu said.

The latest data will add another headache to the Reserve Bank of India (RBI) which will present the mid-quarter review of the monetary policy on Friday.

Inflation continues to remain high — it was 9.22% in July — and economists expect the Centre to raise the rates further. “RBI’s main focus will remain on checking inflation, which continues to be uncomfortably high, hardly a situation for the RBI to switch off just yet,” said Rajeev Malik, senior economist at broking and research firm CLSA, Singapore.