IIP Growth in July dismal at 3.3.%. Investors will be disappointed

IIP growth was a disappointment for the month of July. The IIP figures show growth of 3.3% against 8.8% in June. This far below what analysts were expectating.

Manufacturing growth for the month of July saw growth of tepid 2.3% vs 10% in June. Meanwhile, the July consumer goods saw growth of 6.2%.

India's industrial output or IIP went up by 3.3% in July compared to the correspondent period of the previous year, i.e. 2010. It was also slower than June's (2011), 8.8% growth.

With interest rates continuously on the rise, the effect is felt by the manufacturing sector of the economy. IIP was below expectations on account of manufacturing output as it holds a 76% of the industrial production. The manufacturing went up by a tepid 2.3% in July.

The consumer good sector went up by 6.2%, and electricity growth saw an increase of 13.1% in the month of July compared to 7.1% in June. Meanwhile, the Capital goods growth rate fell from 37.7% in June to 15.2% in July.

Recently the central bank has used the element of 'surprise' to make its tool of raising interest rate more effective in order to control inflationary pressure. With headline inflation at the double digit, analysts expect that the Reserve Bank will likely increase its key policy rates.

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