Concern over sharp fall in capital goods sector

Our Bureau Updated - December 12, 2011 at 09:43 PM.

India Inc was disappointed with the decline in the Index of Industrial Production (IIP) by 5.1 per cent in October, and said it indicated a severe slowdown in the industry sector.

“While all sectors have fallen in October, the sharp decline in the capital goods sector is of particular concern, as it indicates lack of investments that will continue to be a drag on growth.

This would have serious consequences on employment and livelihoods,” said a statement by the Confederation of Indian Industry (CII).

According to FICCI, the October IIP figures are more worrisome as all the three major components - manufacturing, mining and electricity - witnessed either negative growth or slowed down significantly.

Dr Rajiv Kumar, Secretary General, FICCI, said: “Manufacturing in India is hit by both declining consumer demand and falling investments. It would require a two-pronged approach to revive growth in manufacturing.

He said the Reserve Bank should immediately bring down interest rates to stimulate investment and revive consumer durable demand.

Industry chamber, Assocham, said IIP estimates for October mirror the continued downfall of industrial activity. “Policy dynamism is the need of the hour,” its Secretary-General, Mr D.S Rawat, said.

The major impediment has been the spiral in input costs including high borrowing costs, shooting energy and manpower costs. These have culminated in a high cost push inflation scenario in the sector, retarding its output, said Mr Salil Bhandari, President, PHD Chamber.

> manisha@thehindu.co.in

Published on December 12, 2011 16:13