Finance minister Pranab Mukherjee did not give the domestic industry much to cheer about despite strong signs of a crippling industrial slowdown.
“India’s slowdown can be attributed almost entirely to weak industrial growth,” Mukherjee said in his budget speech, but added that there were signs of recovery in coal, fertilisers, cement and electricity sectors.
“Indian manufacturing seems to be on the cusp of revival,” said Mukherjee.
India’s factory output grew by the 6.8% in January — the fastest in seven months — rekindling hopes of an industrial rebound buoyed by a robust manufacturing sector, latest data released on Monday showed.
Factory output had grown by a slower 2.5% in December and by 7.5% in January last year.
Capital goods output, however, contracted by -1.5% in January, mirroring a slowdown in investment.
Last week, the Reserve Bank of India (RBI) slashed the cash reserve ratio (CRR) — the proportion of deposits banks have to park with the central bank — by 0.75 percentage points to 4.75%, which will add R48,000 crore to the pool of resources that banks can lend to final borrowers.
The move is expected to nudge them to reduce interest rates on loans to individual and corporate borrowers.
India’s gross domestic product (GDP) growth slumped to 6.1% during April-December 2011, the lowest in 33 months as the industrial slowdown hit home.
The manufacturing sector, which accounts for about 15% of India’s GDP, grew by 0.4% during the quarter, compared to 7.8% last year, the advance GDP estimates released by the Central Statistical Organisation (CSO) showed.
“It is not going to stimulate growth in the economy,” said RV Kanoria, president, FICCI.
B Muthuraman, president, the Confederation of Indian Industry (CII), said he was expecting much more and the excise-related proposals would push up prices.
“The budget is a missed opportunity,” said Siddharth Birla of CK Birla Group.
A momentum economy