01-14-2008, 02:03 AM
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>Boom story has a gloom sight </b>
Pioneer.com
Priti Bajaj | New Delhi
Reflecting the initial signs of a slowdown, the country's industrial growth plunged to 5.3 per cent in November 2007 as compared to 15.8 per cent in November 2006 primarily due to a slowdown in consumer spending and a sluggish manufacturing sector.Â
Voicing concern at the prevailing situation, economists are of the opinion that the Index of Industrial Production (IIP) released last week has taken a<b> hit due to the combined effect of high base effect, a tight monetary policy and rupee appreciation. </b>
It is noteworthy that the decline in the growth rate in November 2007 has pierced all sectors, with manufacturing growing only at the rate of 5.4 per cent in that month against 17.2 per cent in the same month of the preceding year.
The six infrastructure industries -- coal, steel, cement, electricity, crude oil and petroleum refining -- grew 6.0 per cent in April-November, the first eight months of 2007-08, compared with 8.9 per cent in the year earlier period. The six infrastructure industries account for about 27 per cent of the total weight of the IIP.
The slump in the consumer goods sector also continued unabated with growth in consumer durables slipping from 10.1 per cent to negative 4.1 per cent and for consumer non-durables the respective figures were pegged at 14.8 and negative 2.1.
According to Shashank Bhide, research head with National Council of Applied Economic Research (NCAER), "the drop in the growth rate of consumer durables is not much of a surprise but the decline in growth of non-durables is a surprise. One interpretation of this can be that access to credit cost of credit has been affecting consumer demand for durables."
However, Bhide brushed aside any immediate concerns stating that the momentum of economy is keeping the investment growth in tact and as compared to the October numbers the fall in November industrial growth has not been so dramatic.
Sectoral data released by the Government shows that capital goods and intermediate goods recorded growth rates of 24.5 per cent and 7.3 per cent in November 2007 as against 29.4 per cent and 17.9 per cent, respectively, in November 2006. The growth rate in capital goods sector increased to 20.8 per cent in April-November this year as against 17.4 per cent during the corresponding period last year.
During November 2007, growth rate in manufacturing sector, which has a weightage of 79.4 per cent, dropped sharply to 5.4 per cent from 17.2 per cent in November 2006. Reacting to the fall in industrial production and manufacturing by double digit Assocham president Venugopal N Dhoot said this was indicative of the fact that these sectors need sops so that they can get out of stress.
According to Mahesh Vyas, managing director and CEO, Centre for Monitoring Indian Economy (CMIE), "the decline in IIP reflects the effect of hike in interest rates. Right from April 2007, the consumer durables sector growth rate has been going down in line with decline in personal loan disbursal."
Agreeing with other analysts on the issue of investment boom, Vyas stressed that capex monitoring of CMIE of the quarter ended December 2007 showed that 4,89,000 crore worth of fresh investments were announced, indicating that the economy's growth momentum will continue, at least for now.
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Pioneer.com
Priti Bajaj | New Delhi
Reflecting the initial signs of a slowdown, the country's industrial growth plunged to 5.3 per cent in November 2007 as compared to 15.8 per cent in November 2006 primarily due to a slowdown in consumer spending and a sluggish manufacturing sector.Â
Voicing concern at the prevailing situation, economists are of the opinion that the Index of Industrial Production (IIP) released last week has taken a<b> hit due to the combined effect of high base effect, a tight monetary policy and rupee appreciation. </b>
It is noteworthy that the decline in the growth rate in November 2007 has pierced all sectors, with manufacturing growing only at the rate of 5.4 per cent in that month against 17.2 per cent in the same month of the preceding year.
The six infrastructure industries -- coal, steel, cement, electricity, crude oil and petroleum refining -- grew 6.0 per cent in April-November, the first eight months of 2007-08, compared with 8.9 per cent in the year earlier period. The six infrastructure industries account for about 27 per cent of the total weight of the IIP.
The slump in the consumer goods sector also continued unabated with growth in consumer durables slipping from 10.1 per cent to negative 4.1 per cent and for consumer non-durables the respective figures were pegged at 14.8 and negative 2.1.
According to Shashank Bhide, research head with National Council of Applied Economic Research (NCAER), "the drop in the growth rate of consumer durables is not much of a surprise but the decline in growth of non-durables is a surprise. One interpretation of this can be that access to credit cost of credit has been affecting consumer demand for durables."
However, Bhide brushed aside any immediate concerns stating that the momentum of economy is keeping the investment growth in tact and as compared to the October numbers the fall in November industrial growth has not been so dramatic.
Sectoral data released by the Government shows that capital goods and intermediate goods recorded growth rates of 24.5 per cent and 7.3 per cent in November 2007 as against 29.4 per cent and 17.9 per cent, respectively, in November 2006. The growth rate in capital goods sector increased to 20.8 per cent in April-November this year as against 17.4 per cent during the corresponding period last year.
During November 2007, growth rate in manufacturing sector, which has a weightage of 79.4 per cent, dropped sharply to 5.4 per cent from 17.2 per cent in November 2006. Reacting to the fall in industrial production and manufacturing by double digit Assocham president Venugopal N Dhoot said this was indicative of the fact that these sectors need sops so that they can get out of stress.
According to Mahesh Vyas, managing director and CEO, Centre for Monitoring Indian Economy (CMIE), "the decline in IIP reflects the effect of hike in interest rates. Right from April 2007, the consumer durables sector growth rate has been going down in line with decline in personal loan disbursal."
Agreeing with other analysts on the issue of investment boom, Vyas stressed that capex monitoring of CMIE of the quarter ended December 2007 showed that 4,89,000 crore worth of fresh investments were announced, indicating that the economy's growth momentum will continue, at least for now.
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