India’s industry, infrastructure growth nosedives

October 10th, 2008 - 8:09 pm ICT by IANS  

New Delhi, Oct 10 (IANS) Faced with the twin onslaught of high inflation of 11.8 percent and volatile capital markets, India’s industrial production and infrastructure sector nosedived in August, logging just 1.3 percent and 2.3 percent growth.The poor pace of expansion in the two core sectors has also not helped policymakers grappling with a persistent turmoil in the domestic capital market, notwithstanding monetary measures taken to pep up sentiments.

Six core infrastructure industries - crude, petroleum refinery products, coal, electricity, cement and finished (carbon) steel - clocked just 3.4 percent growth (provisional) in April-August, as against 7.1 percent in the corresponding period last year.

“Crude oil production registered a negative growth of one percent in August this year as compared to 6.5 percent in the last corresponding month,” said the government in a statement.

A 1.3 percent growth in industrial production, as showed in the index released Friday by ministry of statistics and programme implementation, is much lower than 10.9 percent in the previous corresponding period.

Industrial production logged 4.9 percent growth in the first five months of the current fiscal, as against 10 percent in the last corresponding period.

“This is a significant deceleration. We are in an industrial recession,” said M. Govind Rao, member, Prime Minister’s Economic Advisory Council, a high-level government body to assess the outlook of India economy.

The sector-wise growth rate in August sent a rather grim picture to policymakers as mining, manufacturing and electricity grew at 4 percent, 1.1 percent and 0.8 percent respectively, whereas the growth logged last year in the same period was 14.7 percent, 10.7 percent and 9.2 percent.

“This is a worrying sign. The growth of 1.3 percent is exceptionally low,” said Confederation of Indian Industry (CII), a leading industry chambers, in a statement.

Rao, also director of the city-based National Institute of Public Finance and Policy (NIPFP), did not rule out the need to revise the growth forecast.

“Maybe we will have to revise the growth forecast now there is a global financial crisis and a serious liquidity crunch in the Indian situation,” said Rao.

The government in a statement Wednesday had reiterated it had targeted achieving a growth close to 8 percent in the current fiscal against an average of 9 percent in the last three financial years (2005-8).

“A 7 percent growth rate is still achievable but we will have a much more serious problem during the next year,” said Rao while talking to a private news channel.

The country’s economy registered 7.9 percent growth in the first three months of the current fiscal against 9.2 percent in the same period last year.

“An 8 percent growth target in the current fiscal seems to be difficult, particularly in view of contraction in mining, electricity and manufacturing sectors,” Dalip Kumar, an economist with the National Council of Applied Economic Research.

In April-June this year, manufacturing and electricity and allied services contributed only 5.6 and 2.6 percent to the country’s gross domestic product (GPD) against 10.9 percent and 7.9 percent respectively in the past corresponding period.

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