Capital goods growth plunges

The capital goods sector suffered a big jolt in October, with year-on-year growth falling steeply to 3.1 per cent, plunging from 20.9 per cent in the same month a year ago.

The capital goods sector, which supplies machines to both sluggish manufacturing and laggard infrastructure sectors, suffered a big jolt in October, with year-on-year growth falling steeply to 3.1 per cent, plunging from 20.9 per cent in the same month a year ago.

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Infrastructure industries, which club power, cement, coal, steel, crude oil and petroleum in government classifications, grew by 3.4 per cent year-on-year in October, down from 4.6 per cent a year ago. With growth in these sectors sluggish, the companies that supply machines and equipment for their projects also apparently suffered its consequences.

Experts see a ray of hope in the fiscal stimulus package of Rs 10,000 crore which is expected to boost demand.

Economists say that the liquidity problem in the month of October, which resulted in banks slowing loans, impacted several infrastructure projects which are now expected to look up in the next quarter beginning January.

“I expect RBI to announce further rate cuts. But just increasing the quantum of spending will not help. Execution will also matter,” said DK Joshi principal economist, Crisil.