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Companies to face lower income growth

Companies, squeezed by costly borrowing, high input prices and slump in consumer demand, are set to record lower income and profit growth as a crippling industrial slowdown hit home.

business Updated: Feb 29, 2012 22:00 IST
HT Correspondent

Companies, squeezed by costly borrowing, high input prices and slump in consumer demand, are set to record lower income and profit growth as a crippling industrial slowdown hit home.

India's manufacturing sector that accounts for 80% of the total industrial production, barely managed to grow at a flat 0.4% during October to December quarter in 2011, the latest data on GDP released on Wednesday showed.

Experts attributed the slowdown to policy uncertainty and monetary tightening over the last 20 months, where the Reserve Bank of India had raised interest rates 13 times in a continuing tug-of-war between sliding growth and rising inflation.

"The government needs to take this seriously and implement the reform process at the earliest." Rajiv Kumar, secretary general, Federation of Indian Chambers of Commerce and Industry (Ficci) told Hindustan Times. "The slowdown will further affect the quarterly results of the companies and this could even affect employability."

The Confederation of Indian Industry said in such a situation, all policy levers should be used to drive a revival in the economy. "Project clearances should be hastened, implementation of the manufacturing policy should begin by identifying specific zones where industry can invest and interest rates should be reduced," Chandrajit Banerjee, director general, CII said in a statement.

In January, the RBI cut the cash reserve ratio (CRR) in a move that will nudge banks to lower interest rates.