Several industries in negative territory, needs urgent steps: ASSOCHAM

December 17, 2012 12:50 pm

Indian industry has been thrown in a vicious circle where investment is declining fast and it is coupled with a contraction in consumer demand, necessitating some big initiatives not only from the government but also from the Reserve Bank of India, ASSOCHAM has said.
A quick analysis of the Index of Industrial Production (IIP) for September shows that close of a dozen sectors have seen massive drop in output as they found a big drop in consumer demand. The overall trend is visible in worsening conditions in the capital goods sector, which saw a decline of 12.2 per cent in September this fiscal.
Even in September, 2011, the capital goods segment — which is a kind of index of the investment appetite in the industry — had witnessed a decline of 6.5 per cent.
“Instead of improvement, the capital goods sector has seen deterioration throwing a major challenge for the Indian economy,” said ASSOCHAM President Rajkumar N. Dhoot.
ASSOCHAM President also said what is even more worrisome is the fact that the manufacturing sector which is the biggest creator of jobs in the industry has slipped into the negative territory posing serious threat to the employment situation in the country.
“We find ourselves in a kind of a chicken and egg situation. For reviving investment the consumer demand is required, which itself is showing sluggish trend. The consumer demand is a function of increased employment which can be generated by increased employment,” the ASSOCHAM paper reported.
“We are hopeful that the initiative like the National Investment Board would materialize soon. That step would be critical in reviving the investment sentiment in the entire infrastructure space,” said the ASSOCHAM chief.
While the Finance Ministry has taken some encouraging steps to revive the investment sentiment, the efforts have to be supplemented by the RBI and different wings of the government, the chamber said.
“We are hopeful that the initiative like the National Investment Board would materialise soon. That step would be critical in reviving the investment sentiment in the entire infrastructure space,” said the ASSOCHAM chief.