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Slowdown of 1% current industrial growth will impact badly
In April 2013, India’s industrial growth slowed to an all-time low of 1%. This is the lowest the country has seen in the last 20 years. Hence, it has raised concerns among the general population as well as those in the policy making division.
In March 2013, the industrial growth of India rose by 2.5%, showing signs of recovery in the manufacturing and power sectors. However, in light of the current slowdown of India’s industrial growth, the government’s plan to increase the share of the manufacturing sector in the country’s economy has gone for a toss. As a result, the government’s plan to create millions of jobs in the manufacturing sector has been severely affected.
According to the Central Statistics Office, industrial output of India had plunged to 0.6% during the economic crisis of 1991-1992. During the same period, the output of the manufacturing sector contracted by 0.8%.
Experts at the credit ratings agency Crisil believe that history is repeating itself. The industrial sector in India has once again been hit by high inflation, increasing interest rates, global economic slowdown and delay in the implementation of infrastructure projects.
The manufacturing sector has been affected by the country’s low consumption rate. The Confederation of Indian Industry considers the negative growth of the manufacturing sector worrisome, and hopes that the Finance Ministry will not raise taxes or introduce new taxes, thereby reducing the rate of consumption even lower.
Due to the slowdown of industrial growth, existing projects are suffering, with time and cost overruns. It is the first time in 10 years that car sales in India have declined. In the financial year that just ended, car sales fell by 6.7 percent. Showrooms are home to unsold cars, and the automobile industry is forced to come up with offers and discounts to boost consumerism.
Automobile giants such as Toyota, Volkswagen, Ford and Chevrolet are preparing themselves for a disappointing year ahead. Given the current situation, new automobile companies are thinking twice about entering the Indian market. So, the slowdown of 1% of industrial growth can affect the country badly; as the output of major sectors reduces, a domino effect is ignited, affecting related and supporting sectors.
Hence, for the recovery of the industrial sector, the government is coming up with policies to increase consumption and power generation. Statistics show that the growth of electricity has decelerated to half of the figure in 2011-2012. Hence, to bring the industrial growth back on track, it is important for the government to generate sufficient power, enhancing the growth of electricity.
Economists have added that by easing monetary policies and clearing pending projects, the industrial sector will be able to recover further. With increasing interest rates and high inflation, consumers are spending less, which is a huge concern for policymakers and government officials. It is time policymakers changed the existing regulations and laws to improve the industrial sector and boost economic growth.
With the general election around the corner, it is indeed a testing period for the current government. Warren Buffet, an American business magnate, once said, “The investor of today does not profit from yesterday’s growth”.
So, it is important for India to continue generating profits to stay ahead of the competition. To prevent further slowdown of industrial growth, the government needs to constantly change its policies to boost and fuel economic growth. Else, the consequences will be disastrous.