ASSOCHAM

INDUSTRY

Industrial growth to be less than two per 

cent in FY 2013, ASSOCHAM

Growth prospects for India's industrial production look quite weak and the output may show less than two per cent expansion in the current financial year, an ASSOCHAM study has indicated. 

The not-so-bright outlook for the industrial growth has been projected despite the fact that there are visible signs of improvement in the business confidence in the last two months due to several bold policy initiatives by the government. 

         

However, as the chamber said in its previous study, there would be a lag between the improvement in the business confidence and the conversion into the growth pick-up.

       

"In any case, it is not only the business confidence but also the consumer confidence all through the world, which is at low ebb and that is a real area of concern," said ASSOCHAM President Rajkumar N Dhoot. 

     

The manufacturing, the main stay of the overall Index of Industrial Production (IIP) remains in a quite a bad shape and so are the other critical sectors such as capital goods, durables and non-durables.

    

The IIP grew by 2.6 per cent in the financial year of 2011-12 and most of its slowdown had come from third and the fourth quarters. The IIP had grown by a healthy 6.1 per cent in the first quarter of the previous year, whereas it has dropped to minus 0.1 per cent in the April-July period of the current fiscal. 

Looking forward, the pressure on the manufacturing, capital goods and durables will only remain mainly from high raw material cost, prolonged slowdown and recession in several parts of the world, high interest rates and low consumer confidence. 

      

The problem for the consumer confidence also stems from the fact that he is not sure about the future and has the lurking fear of difficult times ahead. 

The chamber fears that the hiring in the industry would slow down, annual pay rises may not take place and in some cases, there could be job losses as well. 

It said the government has been doing quite a bit in the past couple of months trying to send a positive signals through decisive measures - be it foreign direct investment in multi-brand retail, clarity on retrospective tax laws, IPO reforms and intentions to go ahead with hiking  and allowing FDI in insurance and pension sector respectively. 

"As we have been maintaining that it is time for the Reserve Bank of India to take a calculated risk. In any case if there has to be a trade-off between inflation and job-saving, the employment must get a priority. The problem arises from the fact that the growth is mistaken as some kind of abstract economic phenomenon. However, we in the industry see it clearly a factor which creates or destroys employment. We cannot afford job losses as a country. Instead, we need to add as many jobs as possible even in the worst of global slowdown," Mr Dhoot said. 

    

He said it is fine for the RBI to advise the government to control its fiscal deficit and then control inflation so that in the long-term sustainable growth can be achieved. "The problem is that we are no more in a situation where we can bother about the long-term. We need short-term and quick solutions because the headwinds from the rest of the world are quite strong. First we must ensure growth and then bother about sustaining it. How do we sustain growth if it is not there and the numbers come in the negative, quarter and month after month?"

       

The ASSOCHAM study said the consumer demand has to be built in sectors such as automobiles, durables and housing so that he starts spending again. 

For reviving exports, the industry and the government would do well to sit together and find innovate ways to find new markets largely in Asia which is still growing. Besides, the trade imbalance with China has to be corrected so that Indian exporters get access to a big market there.