Reacting to the IIP data for March, the Finance Minister, Mr Pranab Mukherjee, expressed disappointment and blamed the slowdown in demand in the developed countries for the factory output contraction. Besides, the domestic investment recovery remained frail, he added.
Mr Mukherjee noted that RBI's monetary easing will take some time to translate into reduction in interest cost.
Meanwhile, the Confederation of Indian Industry Director-General, Mr Chandrajit Banerjee, said that the March IIP data was "extremely disappointing".
This raises concerns that the economy might be showing early signs of a vicious cycle of de-growth, as a result of multiple issues like high cost and poor availability of capital, high input costs, poor sentiments.
This has not been helped by the recent change in outlook of India by S&P and, of course, the grim global situation – particularly in the advanced economies.
Fortunately, India is in a position, where domestic actions can help effect a turnaround, as we have seen during the crisis of 2008-09.
A coordinated action from the Government and the RBI is called for at this juncture.
Besides easing the monetary policy through rate reduction and also cut in CRR, it is important that some of the key reforms, which are politically relatively easy to get through, are announced at the soonest. The importance of improving sentiments at this stage cannot be overemphasised, Mr Banerjee said.
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