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Industrial output data bolsters S&P warning

A day after Standard and Poor's warned that India may cease to be the darling of overseas investors, the April data of country's industrial output has dampened the spirits of market-friendly forces further. The industrial production growth rate slowed down sharply to 0.1 per cent in April due to contraction in capital goods and dip in manufacturing output, reflecting the sluggish state of the economy.

Many observers feel that this data may force the Reserve Bank of India (RBI) to finally cut lending rates, something that many economists and industry bodies have been demanding. The bank is due to announce its mid-quarterly review of these rates on 18 June.

The growth in factory output, as measured by the Index of Industrial Production (IIP), was 5.3 per cent in April last year.

The manufacturing sector, which constitutes over 75 per cent of the index, grew barely 0.1 per cent, as against 5.7 per cent in April 2011, according to the official data released on Tuesday. The capital goods output declined by 16.3 per cent as against a growth of 6.6 per cent in the same month last year. The mining output contracted by 3.1 per cent in April, as against growth of 1.6 per cent in the same month a year ago.

However, consumer goods production showed a faster growth rate of 5.2 per cent in April, compared to 3.2 per cent in the same month last year. The consumer durables segment also expanded by 5 per cent in April, as against 1.6 per cent in the same month last year. Power generation witnessed a slower growth of 4.6 per cent during April, compared to 6.5 per cent in the same month a year ago.
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