New Delhi, Nov 11: With India Inc blaming high interest rate regime for decline in industrial output growth, Planning Commission Deputy Chairman Montek Singh Ahluwalia today said there is no connection between the two.
"I would not draw any connection between the rate hike and decline in industrial production. The rate today is roughly what it was when the economy was growing at 9 per cent," Ahluwalia said when asked if RBI's tight monetary policy was hampering industrial production.
The Reserve Bank has hiked interest by 3.75 per cent since March 2010 to tame inflation, which is hovering at around 10 per cent. The high interest rate regime has made credit expensive for corporate as well as consumers, which the industry says has hit growth.
Ahluwalia, who was talking to reporters on the sidelines of a Ficci meet, said there are other global and domestic factors that are affecting factory production.
"I do not think the slowing down (of industrial production growth) should be attributed to only the short-term interest rates," he said.
The Index of Industrial Production (IIP) has slipped to a low of 1.9 per cent in September, as per the latest data released here. It was 6.1 per cent in September last year.
"We are concerned that the pace of growth in the economy has gone down. But it (IIP data) is only a one month affair. We need to bring this up," Ahluwalia said.
Apex industry body CII today blamed the high interest rate regime for slowdown in IIP.
"This probably reflects the impact of RBI's interest rate hikes together with the continuous rise in inflation. With the global economic scenario also deteriorating, the RBI should not only pause but begin to reverse its interest rate hikes," CII Director General Chandrajit Banerjee said.
Prime Minister's economic advisory panel chief C Rangarajan has described the dip in factory output in September as "disappointing" and said industry may grow by just 6 per cent in the current fiscal, as against the earlier projection of 7 per cent.
"IIP for September is bad, but I do see a pick-up by the end of March. We had originally expected overall IIP at 7 per cent for the fiscal, but now it could be 6 per cent," Rangarajan, the chairman of the Prime Minister's Economic Advisory Council (PMEAC), told PTI today.
"The IIP numbers are disappointing. It is well below our expectation," he said, adding, "... To some extent, the decline is contributed by negative growth in the mining sector."
The government, Rangarajan said, "should ensure that the fall in coal production is corrected and also investment in infrastructure, especially, roads, rail and power."
