By Express News Service

NEW DELHI: Dragged down by the poor performance of the mining and manufacturing sectors, India’s industrial output growth slumped to 1.7 per cent in May – from 3.1 per cent in April and eight per cent a year ago.

The factory output growth, measured by the Index of Industrial Production (IIP), for the April-May period decelerated to 2.3 per cent from 7.3 per cent in the same period last year, according to the data released by the Central Statistics Office.

Economists watch IIP numbers closely because factory output is the closest approximation for measuring economic activity in the country’s business landscape. The data also shows that the output of the capital goods segment, considered to be a key indicator of investment, has shrunk 3.9 per cent compared with a high growth of 13.9 per cent recorded in May 2016.

The consumer durables segment, too, witnessed a decline. While mining sector output fell 0.9 per cent against a 5.7 per cent growth in the year-ago month, the growth of manufacturing sector slowed to 1.2 per cent from 8.6 per cent in the same month last year. However, electricity generation expanded by 8.7 per cent against 6.1 per cent growth in the corresponding period last year.

Some analysts are of the view that the tepid growth in factory output could put pressure on the Reserve

Bank of India to cut interest rate in its policy review next month.

The government has been nudging RBI to cut interest rates in a bid to increase private investment. Industry, too, has been persistently demanding rate cut to boost investments.

In May, the government had announced a new series, shifting the base year to 2011-12 from 2004-05, changing the weights and adding new items to reflect current consumption patterns. The change was to map economic activities more accurately and project realistic data.

In the new series, the manufacturing sector’s weightage has been raised to 77.6 per cent from 75.5 per cent, with electricity’s share witnessing a decline to 7.9 per cent from 10.3 per cent.