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Growth story at crossroads?

business Updated: Jan 22, 2011 01:39 IST
HT Correspondent

Just when things seemed to be easing, the heat is on again on the economy. Food inflation has remained stubbornly high in the last few weeks, interest rates are rising and growth in factory output has plunged to an 18-month low.

Last year, India was rocked by five major scams — four of these in the last four months.

Hindustan Times commissioned global market research company Synovate to poll top corporate executives to find out their views on certain macro issues facing the nation.

The results showed that the government needs to get its act together quickly and take control before things spin out of control. Inflation, if not checked will derail India’s growth momentum, the poll said.

The survey was carried out among 182 top executives in sectors including packaged goods, advertising agencies, IT, telecom, auto, manufacturing, energy, power, oil and gas among others — across Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Pune and Ahmedabad.

“Industry captains feel that high interest rates are leading to industrial slowdown,” the survey concluded.

The outlook isn’t quite rosy either.

“I see hardening of raw material prices and rising cost of capital as key factors impacting the growth of manufacturing in coming months. Despite stimulus measures, some of the key sectors have not shown adequate growth in the last few months,” said Amit Mitra, secretary general, FICCI.

The runaway price line has upset the government’s plans of implementing a carefully calibrated exit plan of the stimulus package in this year’s budget.

“The plan was to fully withdraw the stimulus when the recovery in demand is robust. While these have been achieved, high prices are a key concern. This may force the government to push back the planned increase in excise duty,” the official said.

"We expect inflation to persistently exceed the comfort zoned," said Sonal Varma of broking and research firm Nomura Financial Advisory.