Pressure built up on RBI over interest rates on Wednesday as India’s industrial output grew by 4.1% year-on-year in August. Factory output had grown by 3.8% in July and 4.5% in the year-ago period, with rising input costs and costlier loans forcing firms to defer investments. The manufacturing sector, which accounts for 80% of India’s industrial production, grew by 4.5% during the month. A slower manufacturing sector growth will hurt corporate profitability and employment prospects in factories.

 “It (IIP) is not encouraging. It is a bit disappointing and it may affect the GDP of second quarter,” finance minister Pranab Mukherjee said.

The RBI, which is trying to control high inflation by squeezing rates, is due to review its monetary policy on October 25.

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