Spiralling inflation and an attendant rise in interest rates appear to have taken the sheen off India’s once-shining economy.
According to latest government data released on Tuesday, industry continued to remain sluggish through June, leaving this fiscal’s first quarter with an industrial growth of 5.2 per cent, almost halved from a year ago.
Most broad categories clocked slower growth, but the dip was most visible in the capital goods sector growing by 6.5 per cent — sharply down from last year’s sizzling growth of 19.1 per cent during the first quarter.
Experts said there were signs of investment peaking out as reflected in slower growth for manufacturing and capital goods.
“There are indications that fresh investment plans are also being reviewed by industry in view of the recent uncertainties especially on the oil price front,” said Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry.
When the first signs of industrial slowdown surface, the government put up brave face saying it could be a blip as investment spending by companies remained robust. But that no longer seems to be the case.
“A slowdown in investment is evident,” said Naresh Takkar, managing director of credit rating firm ICRA Ltd.
The core infrastructure industries, which account for 26.7 per cent of industrial output, also grew by a sluggish 3.5 per cent during the April-June quarter against 6.4 per cent in the same period a year ago.