Industrial production slumps; builds pressure on RBI to cut rates

The Index for Industrial Production (IIP) data for February came in at a disappointing 4.1%, against a broad consensus estimates of around 6.6%. The February basic goods growth came in at 7%, against 5% (year-on-year).

Capital goods growth came in at 10.6%, against -5.7% (year on year). The February mining sector growth came in at 2.1, as against 1.2%.

The poor IIP data numbers which came out today is likely to build pressure on the RBI to cut repo rates in its Monetary Policy Review to be held on April 17, 2012. A cut in repo rates would bring down overall interest rates in the economy and spur industrial growth.

The RBI has cut rates 13 in the last two years, in a move to control inflation.

However, this has adversely affected growth rates in India, with the nation likely to report a dip in GDP to below 7%. It will be interesting to see what the RBI does on Tuesday, but it seems to be a given that it would go ahead and cut the repo rate by 0.25%, at the very least.

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