Industry hopes worst over
Manufacturing growth slumps to 2.7% in Q2, companies eye seasonal turnaround. HT reports. When will this end? | In the line of firebusiness Updated: Nov 30, 2011 22:16 IST
High inflation, rising interest rates and sluggish consumer demand dragged growth in manufacturing to 2.7% in the second quarter of this fiscal against 7.8% in the same period last year, clearly hit by the 13 interest hikes the Reserve Bank has effected in 19 months.
"The cost of capital in India is one of the highest in the world — and only some strong positive developments would induce industry to invest," said Chandrajit Banerjee, director-general, confederation of Indian Industries.
“Today's number is only an official vindication of the weakness already apparent in industrial sectors.”
A revival could well be in the offing. The latter half of the year is traditionally better and despite an abysmal festive season.
“It is difficult to say when there will be a turnaround but I do not think it can get any worse than this,” said Mayank Pareek, managing executive officer (marketing and sales), Maruti Suzuki India Ltd. “Consumer sentiment is the biggest hurdle and any good news can spark a revival.
"This is only a temporary phase and the long term growth story remains intact," said Pareek.
Similarly, steel manufacturing, which bore the brunt of low mining acitivity in the country, may also see a revival in the next few months.
“Second half of the year is always better than the first and I expect good demand in times to come,” said C S Verma, chairman, SAIL.
“Given the global situation, we are better off. However, this is not India's potential at all,”said Onkar S Kanwar, chairman of Apollo Tyres. “I am hopeful that we will register better growth in the second half, especially in the last quarter of the year.”
Policymakers appear to be in consonance.
“My expectation is that by the end of the year, we should pick up,” said Kaushik Basu, chief economic advisor. “The third quarter will also be a difficult quarter, but in fourth quarter we should see a very good pick-up.”