The Hindu Business Line : Chidambaram to review economic scenario

New Delhi, Oct 4 The Finance Minister, Mr P. Chidambaram, will chair a meeting of representatives of industrial houses and lending institutions including commercial banks here on Friday.

The meeting is expected to review the performance of the economy, and in particular look at steps that may be necessary to ensure that deceleration in industrial growth in July 2007 remains a one-off occurrence, sources familiar with the situation said.

Various factors affecting industrial performance including flow of credit, impact of appreciation of rupee against the US dollar and firm interest rates are likely to come up for discussion at the meeting.

Although the consensus forecast (average of the 16 forecasts by the different agencies) continued to indicate an overall GDP growth of 8.5 per cent in 2007-08, sources pointed out that a moderation in growth, appreciating rupee, hardening of interest rates and a decline in the business confidence index have necessitated that overall industrial performance be reviewed.

The overall growth of index of industrial production after having remained in a double digit in the last five quarters declined to 7.1 per cent in July 2007, the latest month for which data is available. The deceleration in growth was particularly strong in capital goods, intermediates and consumer durables segment.

Besides a deceleration in industrial growth, the Business Confidence surveys conducted by various agencies also presented a mixed picture about the short term outlook of the economy.

Although there has been a deceleration in industrial growth in July 2007, which may be a one-off situation, sources pointed out that the investment intentions, as reflected in the data of CMIE, continue to indicate optimism. The overall investment intentions in the manufacturing sector for the last eight quarters indicate a continuing capital boom.