There seems to be more evidence of an industrial slowdown in the offing with a survey released on Sunday saying that 17 of the 91 manufacturing sectors tracked by it showed a dip in production, while another 37 grew at single-digit rates, mainly due to rising cost of credit and an appreciation of the rupee against the dollar.

Only 15 sectors reported over 20% growth, while another 22 grew 10% or more in the first half of the financial year. "The percentage of sectors in excellent and high category (with growth of over 10%) has declined while the percentages increased for moderate and negative category over the period April 2007 to June 2007... More sectors have recorded low growth below 10%," a Confederation of Indian Industry (CII) survey said.

Economists said there was no authoritative study to suggest that FTAs might have affected growth.

The CII survey comes a day before the government releases the industrial growth numbers for the first half but economists are predicting a growth of at least 9%.

"All indications point to a soft landing. High interest rates were meant to slow the tempo and so far it has been on expected lines. RBI would have reacted if the impact was adverse. There is no need to press the panic button on interest rates.

The problem for the industry is that currency appreciation has been very sharp and it has not got sufficient time to adjust. Interest rates, rupee and Free Trade Areas are expected to promote growth and enhance productivity," said D K Joshi, principal economist at rating agency Crisil.

While there was a scare of a slowdown when industrial growth rate dipped to 7.1% in July, data for August painted a different picture with the index of industrial production back to rising at double-digit rates. But there is a fresh worry with the trade data for September estimating import growth a little over 2%, despite the rise in international oil prices. Economists, however, dismissed the low rise in imports as a statistical blip.

The industry body— which has some vocal members who opposed liberalisation in the initial years — also said that in the last six months, the impact of free trade agreements signed by India had started showing its impact. CII blamed FTAs signed in the last two years, though a framework agreement, a precursor to a bilateral pact, was the only deal clinched in recent years. Most other FTAs have been on the backburner due to political opposition as well as the government's inability to convince protectionist industry lobbies about reducing tariffs which would benefit consumers.

Mr. Neeraj Sharma

Neeraj Electronics

CEO, Neeraj Electronics
Jorhat, India

Free Member, Joined :06/09/2007
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