India’s industrial output slides to lowest level in nearly two years

India's industrial output grew just 3.3 percent in July, compared with 9.9 percent a year earlier, the Indian Express reports.

The plunge in the key economic indicator follows a series of aggressive interest rate hikes intended to rein in galloping inflation.

However, the central bank's moves appear to have had a more immediate and dramatic effect on economic growth than on food prices — the government's biggest headache.

July's figure of 3.3 percent was the lowest in 21 months, the paper said.  Worse still, there was a 15.2 percent deceleration in capital goods compared with 40 percent growth last July, suggesting that corporations are no longer investing in capacity expansion.

“The IIP figures are very disappointing. This indicates that the monetary tightening of the Reserve Bank of India has started biting,” the paper quoted R Gopalan, secretary, department of economic affairs, ministry of finance, as saying.

The RBI has hiked the repo rate (the rate at which it lends to banks) 11 times in the last 17 months, for a total increase of 475 basis points.