New Delhi: In an indication on how challenging it will be for the new government to revive the economy, industrial production contracted by 0.5 per cent in March and retail inflation jumped to three months high. Even most of the brokerages and rating agencies in their reports had said that it is unlikely that economy will touch 9 per cent growth rate anytime soon. This is second time in a row that industrial production has contracted. Manufacturing, which constitutes over 75 per cent of the index, declined 1.2 per cent in March against growth of 4.3 per cent a year earlier.
Retail inflation also jumped to 8.59 per cent in April, which will make it difficult for the Reserve Bank of India (RBI) to cut interest rates to boost growth. “We look to the next government and hold out strong hope that quick and bold reforms and implementation will enable a high growth path where manufacturing will play a significant role,” said Sidharth Birla, president, FICCI. However, he added that outlook for the manufacturing sector, as things stand, seems to be disappointing and bleak. “This is also reflected in FICCI’s latest survey on manufacturing. Weak demand and investment conditions continue to plague the sector,” said Mr Birla.
Rating agency, ICRA, senior economist, Aditi Nayar said that a pickup in investment activity is unlikely to take root until H2 FY15, acting as a drag on overall manufacturing growth. “Moreover, with a repo rate cut highly improbable in 2014, interest rates would remain sticky and limit the improvement in consumption sentiments,” she said. The capital goods production, which indicates investment in the economy shrank by 13 per cent in March. Consumer goods sector declined 0.9 per cent in March. India’s Gross Domestic Product (GDP) will grow at a low pace of 4.9 per cent in 2013-14, as per government agency Central Statistics Office (CSO). It will be second straight year when India’s Gross Domestic Product will grow sub-five per cent.
