The biggest industry association in India, the Confederation of Indian Industry, has called for urgent announcements to boost ‘sentiment’ in the Indian economy and reverse the downward slide in the indices.
The CII’s statement came after the latest numbers showed that industrial production growth rate slowed to just 0.1% cent in July due to poor show by manufacturing, mining and capital goods sectors.
The CII and other institutions have been asking the Reserve Bank of India to reduce interest rates, but the central bank has resisted the temptation as inflation rates in India are at very high rates. With the prospect of slowing economy, many economists are now worrying about ‘stagflation’ or a stagnant economy afflicted with high inflation.
“At this juncture, announcements on FDI, fiscal consolidation, manufacturing policy implementation, etc would be of great help. Further, impediments to manufacturing growth such as issues of land, power and business regulatory environment need to be addressed,” CII said.
It said the continuing slowdown of the industrial sector, with manufacturing growth in the negative territory, is even lower than its expectations.
“While monetary intervention in the form of repo rate cut has been due for a while, the economy is in need of sentiment boosters. Investments have dried up, which are evident from the performance of the capital goods sector. It is imprative that non legislaltive policy measures are announced at the earliest, which could help improve confidence levels in the economy,” it said.
Growth in factory output, as measured by the index of industrial production (IIP), was 3.7% in July last year, and 6.1% in the April-July period in 2011-12.
The manufacturing sector, which constitutes over 75% of the index, witnessed a contraction in output by 0.2% in July, as against growth of 3.1% in the same month last year.