August industrial growth has declined by 270 basis points as compared to the previous month, on account of a marginal decline in mining output and a deceleration in electricity output growth. The decline in growth rates has raised hopes that the RBI may decide to keep interest rates steady at its meeting by the end of this month.

Index of Industrial Production (IIP) for the month of August 2006 has increased 9.7 per cent from the same month of previous year, according to quick estimates released by the Central Statistical Organisation. Though industrial growth for the month is lower than 12.4 per cent reported for July 2006, it is better than 7.6 per cent achieved for the same month of previous year.

Industrial growth for the first 5 months of the current financial year remains at 10.6 per cent, 190 basis points higher than 8.7 per cent achieved for the same period of previous year.

The modest decline in growth as compared to the previous month was on account of a marginal 0.1 per cent decline in mining output as against an impressive growth of 6 per cent for July 2006. For the April-August period, mining output growth at 3.1 per cent is much better than 1.6 per cent for the same period of last year.

Electricity generation also saw a deceleration in growth to 3.7 per cent for the month as compared to 8.6 per cent for July 2006 and 7.9 per cent for August 2005. For the April-August period, electricity output growth has declined marginally to 5.7 per cent from 6 per cent for the same period of previous year.

Manufacturing continues to drive growth, with output expanding 11.1 per cent after the scorching growth of 13.3 per cent during the pervious month. Manufacturing growth was at a lower 8.5 per cent during August 2005. For the first 5 months of current year the sector has clocked a growth rate of 11.8 per cent as against 9.6 per cent for the same period of previous year.

Output of capital goods increased 14.7 per cent for the month after expanding 15.4 per cent during the previous month and 12.9 per cent during the same month of previous year. Basic goods output growth declined to 4.9 per cent from 10 per cent for July 2006 and 8 per cent for August 2005. Production growth of intermediate goods also declined modestly to 7.6 per cent from 7.9 per cent a month ago and 3.6 per cent a year ago.

Growth in consumer goods output decelerated modestly after a spectacular performance in July 2006. Consumer goods production increased 14.6 per cent as compared to 17.9 per cent for July 2006 and 9.3 per cent for August 2005. Consume durables output growth improved further to 20.2 per cent for the month while consumer non-durables production growth declined to 12.6 per cent.