labels: Confederation of Indian Industry, Industry - general
CII wants removal of hurdles to growth, fast-track fiscal reforms news
14 July 2008

saying that it was disappointed and concerned with "the slowing industrial production, as demonstrated by the IIP figures for May", industry body CII has caleed for removal of the constraints to growth being faced by industry.

"CII recognises that inflation is rising largely due to factors whose origin does not lie in the domestic economy," sayiing the rising international prices of oil and other commodities were responsible for the price increase in India.

Saying that it appreciated the dilemma before the government and the Reserve Bank of India (RBI) on balancing the objectives of robust growth and low inflation, CII said that the time has come for renewed focus on the growth objective.

"Broad policy suggestions made by CII for resuscitating growth include the removal of hurdles to investment, improved access to capital, fast-track fiscal reforms such as quick introduction of GST and infrastructure building," it emphasisied.

It said in  a statement, "At 3.8 per cent, this is the first time that IIP growth has fallen to such a low rate since March-2002. It seems that the period of robust 8 per cent+ growth of the last four years is coming to an end."

According to a CII analysis, industrial growth has been on a clear downtrend since January 2007, raising fears of a distinct possibility that growth will be below potential in the near term. Average growth in April-May 2008 was 5.0 per cent down from 10.9 per cent in the previous year.

Figure 1: IIP growth: 3-month moving average

What is more troubling is the fact that the slowdown is spread across sectors, the industry body points out.

"The slowdown in capital goods is especially worrisome as it indicates slower growth in investment demand." It said that while other sectors have been slowing down through last year, growth in the capital goods sector had remained strong and kept us hopeful that investment demand remains strong.. The most recent data shows a fall in the demand for capital goods, suggesting a possible slowdown in corporate plans for capacity expansions.
 
Figure 2: Sector-wise break-up in IIP growth

Growth of Index of Industrial Production (Use Based)
(Base : 1993-94=100) April-March April-May
2006-07 2007-08 2007-08 2008-09
Basic goods (355.65) 10.3 7.0 9.4 3.5
Capital goods (92.57) 18.2 16.9 16.9 6.5
Intermediate goods (265.14) 12.0 8.8 9.7 2.3
Consumer goods (286.64) 10.1 5.9 11.6 7.9
Consumer durables (53.65) 9.2 -1.0 0.8 4.8
Consumer non-durables (232.99) 10.4 8.3
15.4
8.8
Growth of Index of Industrial Production (Sectoral)
(Base : 1993-94=100) April-March April-May
  2006-07 2007-08 2007-08 2008-09
Mining (104.73) 5.3 5.1 3.2 5.6
Manufacturing (793.58) 12.5 8.7 11.8 5.3
Electricity (101.69) 7.3 6.3 9.0 1.7
General (1000.00) 11.5 8.3 10.9 5.0
Source: CSO

Together with the slowdown in growth, inflation has risen to exceed 11 per cent in June following the hike in administered fuel prices.


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CII wants removal of hurdles to growth, fast-track fiscal reforms