Factory output diappointing, may affect GDP: Pranab

Disappointed with the factory output growth of 4.1 percent in August, Finance Minister Pranab Mukherjee today said it may impact India’s second (July-September) quarter GDP.

“It (IIP) is not encouraging. It is a bit disappointing and it may affect the GDP of second quarter,” he told reporters here.

The factory output, as measured by the Index of Industrial production (IIP), was 4.1 per cent in August, lower than 4.5 per cent in the same month last year.

Mukherjee, however, declined to comment on the extent to which the subdued IIP numbers will impact the economic growth during the July-September quarter (Q2) of this fiscal.

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“To what extent it (slowdown in IIP) would affect, it would be premature to make any assessment,” Mukherjee added.

India’s economic growth fell to 18-month low at 7.7 percent in the April-June period (Q1). The government expects the country to grow by around 8.5 percent during 2011-12.

As per the official data released today, the IIP growth during the April-August is 5.6 per cent, as against 8.7 per cent in the corresponding period of 2010-11.

However, July IIP growth has been revised upwards from 3.3 per cent to 3.8 per cent.

“The silver lining is that IIP has improved from July figure… But compared to corresponding period of previous year, it is quite low,” Mukherjee added.

Meanwhile, economic affairs secretary R Gopalan said that the slowdown in the IIP numbers is a matter of concern but expressed confidence that the figures would improve from here.

“It is a cause of concern. But as we go along, if you see the previous year, always second half IIP numbers have been good,” he said.

PTI