The factory output numbers for September entering the negative zone have re-fuelled India Inc’s demand for easing monetary policies.

The Index of Industrial Production (IIP) has dipped to 0.4 per cent during September from 2.5 per cent in the same period last year, and that has rattled the industry.

FICCI and CII have asked for a revision of policy rate by the Reserve Bank of India. Director-General of CII Chandrajit Banerjee said, “While fully appreciating the imperative of anchoring inflation, it is CII’s view that the RBI now needs to intervene and reduce interest rates since a complete sacrifice of growth is not in the interest of the economy.”

Echoing the same sentiment, Assocham’s Secretary-General D.S. Rawat urged policymakers to announce special incentive for investors in manufacturing capacities like 80 (J) income tax provision, placing many of the infrastructure goods under the focus product scheme, increasing the interest subvention limit, initiating process reforms, improving on the availability of credit and bringing down its costs.

With a belief that manufacturing growth is yet to bottom out, FICCI chief R.V. Kanoria presented a wish list for revival.

“It is important that the Government does not lose momentum on the reform front and implement some big ticket reforms like implementation of GST (Goods and Services Tax), NIB (National Investment Board),” he said.

Meanwhile, economists and market analysts apprehend that things will not be much different in the coming months.

Bhupali Gursale, Economist, Angel Broking, said, “Even on a three-month moving average basis, growth has been nearly stagnant and unless there is some recovery in the second half of the fiscal, industrial production for the fiscal is likely to stabilise at a low level.”

Rikesh Parikh, Vice-President (Equities), Motilal Oswal Securities, said, “The IIP shows weakness far greater than anticipated as not only it failed to capitalise on the low base but also the two critical sectors, capital goods and consumer goods showed strong decline. Thus, both investment and consumption, the two most critical drivers of domestic growth, show renewed weakness.”

However, Aditi Nayar, Senior Economist, ICRA, said that industrial growth may pick up in October, though it is likely to be short lived.


(This article was published on November 12, 2012)
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