New Delhi, May 11: The bleak IIP numbers have got both industry and the government worrying.
Commerce minister Anand Sharma expressed “deep concern” over IIP and urged the RBI to offer manufacturers lower lending rates to help revive a sector that employs millions of people across the country.
Expressing disappointment over the dismal industrial performance, corporate India felt the figures indicated a continued slowdown and demanded a rate cut.
The Confederation of Indian Industry (CII) said lowering of interest rates was necessary to boost the manufacturing sector, which is facing issues like high input costs and poor availability of capital.
CII director-general Chandrajit Banerjee said, “A co-ordinated action from the government and the RBI is called for ... Besides interest rate reduction, it is important that some key reforms are announced soon.”
According to Ficci, “The figures are indeed serious and point towards a continued slowdown, which does not seem to have bottomed-out.”
“It is high time that the government fast-tracks the implementation of major projects, which will increase the overall confidence and also stimulate growth in the industrial sector,” Ficci president R.V. Kanoria said.
The chamber also raised doubts over the credibility of data released by the government as the March figures show a high degree of volatility in industrial performance.
“The high negative growth of some important segments such as apparel and capital goods in March 2012 is in sharp contrast to their positive growth in the previous month which also raises doubt over the quality of data,” the chamber said.
“Unless the government acts immediately on reforms front, we do not expect an improvement in manufacturing until the second half of this fiscal,” Ficci said and added that the GDP growth for 2011-12 will be much below the 6.9 per cent envisaged.
“With the overall IIP for the fiscal barely growing by 2.8 per cent, the overall GDP growth for 2011-12 would be below the expected level. Given the dismal investment activity, the RBI is likely to ease the policy rates further from June,” Arun Singh, economist with Dun & Bradstreet (India), said.
The PHD Chamber said that policy reforms should focus at stabilising the macro-economic environment to retain the investor's confidence.
Assocham added that the factors affecting the dismal growth included growing uncertainty in the government over tax policies.