With IIP contracting for the second month in June, India Inc today demanded a cut in interest rates to revive demand and to fast-track implementation of large projects to boost economic growth.
Industry body Federation of Indian Chambers of Commerce and Industry (FICCI) said the Index of Industrial Production (IIP) figures for June are indeed a matter of concern and clearly indicate that supply side bottlenecks and weak consumer demand are weighing down on industrial growth.
"The continuous de-growth in manufacturing will impact the employment scenario and manufacturing can be revived by stimulating demand, lowering the interest rates and expediting investment projects," Ficci president Naina Lal Kidwai said.
Another industry chamber Confederation of Indian Industry (CII) said that IIP number in June is a matter of concern and does not bode well for early revival of the sector.
The industrial production contracted 2.2 per cent in June, the second straight monthly drop, due to poor show by the manufacturing, mining and power sectors and a decline in production of capital goods.
"What is especially discouraging is the sharp decline in output of all sub-sectors - manufacturing, mining and electricity - which continue to be under stress owing to a spate of inhibiting factors such as high interest rates, flagging investments, policy bottlenecks and subdued demand conditions," CII director general Chandrajit Banerjee said.
While fully appreciating the RBI's compulsions to keep the rupee under check, he said, it is also important that theRBI takes cognisance of the steep slide of industrial production and reduce interest rates to revive demand. However, easing monetary policy alone is not sufficient.
This must be supplemented with government action to revive investment and stimulate demand, CII said.
Assocham said the industrial demand continues to remain suppressed as the consumer and investor sentiment has not recovered yet. The most worrying aspect of the IIP number is the decline in manufacturing and mining in June, 2013. It is the manufacturing which has to look up for generation of jobs.
However, Assocham secretary general D S Rawat said, there was some good news with regard to exports and a considerable reduction in the trade deficit.
"Hopefully, improvement in the external situation and improvement in the management of current account deficit will give elbow room to the government to attend to domestic sector and the issues like interest rates could be tackled," he said.
The country's exports grew by 11.64 per cent in July, the most in nearly two years, while imports dipped by 6.2 per cent. The trade deficit was unchanged from $12.2 billion in June.