The Hindu Business Line : Capital goods: Govt studying dip in growth

New Delhi, March 13 Surprised at the Central Statistical Organisation (CSO) data on industrial production, which show the growth in the capital goods sector has been a dismal 2.1 per cent in January 2008, the Government has decided to look deeper into the matter. "`I have called for the relevant data and will look into the reasons for this,” the Minister of State for Industry, Mr Ashwani Kumar, told Business Line here on Thursday.

Debate in Parliament

Incidentally, a private member’s resolution is listed for debate in Parliament on Friday exactly on the same subject. “For this discussion, I am preparing the material and, therefore, I am not in a position to disclose much today,” Mr Kumar added.

Industrial circles too expressed surprise at the CSO data, saying the situation on the ground did not corroborate the official statistics. “We had seen the slowdown coming in the wake of high interest rates. When interest rates are high, investment decisions do get impacted, but the slowdown may not be to the extent of what is being reflected by CSO,” an economist with a leading chamber of commerce said.

Mr Ashwani Kumar too maintained that the slowdown was being witnessed for the last six months or so. The reasons he cited were the high interest rate regime, the appreciating rupee which was affecting export production and the high base levels of the past which in turn would show lower growth rates for the present.

“Some corrective steps have already been taken and some more may be considered. We are looking into the matter deeply,” the Minister added.

Officials in the CSO tried to allay apprehensions about a sudden grounding in capital goods production by pointing to the fact that the cumulative figures for this sector for the April-January 2007-08 period show a healthy growth of 18.3 per cent, the same as that for the April-January 2006-07 period. “In fact, if you see the use-based classification figures, capital goods have done the best among basic and intermediate goods as well as consumer goods,” one CSO official said.

Giving a rough indication of the sectors which have not performed well, the official said diamond tools, turbines, switchgears, ship breaking, auto rickshaws and furnaces were among the laggard performers.

Case for lower rates

Drawing from the official data, the industry has now renewed the demand for a reduction in the interest rates, saying that concerns about inflation were misplaced as inflation was primarily driven by food prices, and not by manufactured goods prices which have not risen much due to competition in the market.

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