The index of industrial production, or IIP, which measures the growth in output from various sectors of the economy has entered negative territory
Monday blues it sure was.
First, news came in that industrial output had recorded its steepest fall in over two years in October, pushed over the edge by soaring interest rates, inflation and global uncertainties, not to forget a government clampdown on manufacturing and mining sectors.
The index of industrial production, or IIP, which measures the growth in output from various sectors of the economy like mining, manufacturing and electricity, weighed in at -5.1% for the month — the first time since June 2009 that industrial production has entered negative territory —— compared with 1.9% in September and 11.3% in October 2010. The fall was driven by a 6% fall in manufacturing and a fall of 7.2% in mining, as estimated by Deutsche Bank.
Though a decline in the index was widely expected, the magnitude took everyone by surprise.
Next thing one knew, the stock market, already jittery from developments in the euro zone and uncertainties at home, had lost its legs.
The Bombay Stock Exchange barometer ended the day down 343 points, after having lost 275 points on Friday and 388 points on Thursday — the loss of more than 1,000 points in three days nearly erased gains made painstakingly over the previous seven sessions.
The decline was in sync with major European stock markets. Key indices in France, Germany and the United Kingdom were down 1.5-2% after Moody’s became the second major rating agency to warn of a downgrade to the creditworthiness of European nations, making it more expensive for them to borrow in international markets.
But more was to come. The rupee made a new lifetime low of 52.84/85 against the dollar as demand for the US currency soared amid signs of FIIs pulling out money in the wake of weakening growth.
Forex dealers cited the plunge in stock markets and the dollar gaining strength against its rivals in the overseas market among factors that forced the local currency to shed a whopping 81 paise in a day.
At the end of the day, few were willing to bet the next session would be any better, given that industrial output growth has fallen six times over the last seven months.
This latest proof of economic deceleration could well prompt the Reserve bank of India ease key rates in a bid to spur growth again, economists said, though not everyone’s convinced the central bank will junk its inflation fight just yet.
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