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Industry still not out of the woods
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Bikky Khosla | 13 Jul, 2010
Even as bankers have said that there's a 20 percent credit growth in the current fiscal, industry stalwarts are saying that the manufacturing sector is likely to witness a further slump from June onwards. With all eyes on the Reserve Bank which would come out with the monetary review on July 27, there are all-round expectations that it would tighten policy rates to check double digit inflation.
However my main concern is the likely slowdown in the manufacturing sector as predicted, which can make the industry jittery and thus calls for constructive measures from the apex bank.
The upcoming review of monetary policy should thus keep these factors in mind before announcing any measures so as not to hurt the sentiments of the manufacturing sector any further. While Monday's figures show industrial output rising to 11.5 percent in May from a year earlier, there was considerable slowdown in growth as compared to April.
Availability of raw materials, hardening of raw material prices and credit at reasonable rates are the biggest constraints for the manufacturing sector. I will say, to bring the industry out of the woods the government has to push for reforms in the infrastructure, rein in fiscal deficit and work towards skill development on a priority basis to boost demand and reduce production costs in industry.
Meanwhile, I get a feeling that external factors like weak recovery in US economy, the European debt crisis, and also internal factors like lack of demand in consumption may force the industry to go slow on fresh investments.
The labour-intensive sectors like textiles and handicraft too have not shown signs of robust growth which is a major concern because if this trend persists, the employment sector is likely to take a even bigger hit. Against the current backdrop, it is of utmost necessity for the government to give a fillip to the industry by providing an impetus to growth rather than just reining in inflation.
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Full Capital Convertibility & Aggressive Investment Policy is the medicine
Dharmarajan - Foreign Trade Consultant | Fri Jul 16 13:23:28 2010
The government has been for many years playing around with so called reform measures. But these are largely selective and slow in nature. Now since there seem to be a political stability, it is time for pushing large scale reform measures followed by aggressive investment policy to attract capital inflows in large scale. It is only through this method industrialization can leap forward to match with that of China. Rest of the problems will take care of themselves.
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Re: Full Capital Convertibility & Aggressive Investment Policy is the medicine
G.prakash. | Sat Jul 17 13:06:22 2010
Afterglobalisation,liberalization,privatization our economy grown in many parameters, now its time to review that whatever we have achieved was not solved the problems like Poverty, unemployment, and other socio economic problems, whether allowing full convertibility will solve above problems. and there is a chances of wealth will be limited to few hands so is we really prepared for allowing full capital convertibility.....
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Re: Full Capital Convertibility & Aggressive Investment Policy is the medicine
G.prakash. | Sat Jul 17 13:07:52 2010
After globalisation,liberalization,privatization our economy grown in many parameters, now its time to review that whatever we have achieved was not solved the problems like Poverty, unemployment, and other socio economic problems, whether allowing full convertibility will solve above problems. and there is a chances of wealth will be limited to few hands so is we really prepared for allowing full capital convertibility.....
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Industry still not out of the woods
Vaishal Kapadia | Thu Jul 15 06:40:55 2010
One another reason for lack of robust growth in the labour intensive sector like textiles is the Minimum wage scheme of the State Governments of UP and Bihar. This scheme has led to acute shortage of labor in the industrial workhorse of India i.e. Gujarat and Maharashtra. Production has been curtailed because of labour shortage.
Fiscal Deficit
O.Paul | Wed Jul 14 22:20:06 2010
According to Keynesian economic theories, running a fiscal deficit and increasing government debt can stimulate economic activity when a country's output (GDP) is below its potential output.
Yes, we are well below out potential output.
Slowdown in the manufacturing sector
Jose | Wed Jul 14 00:21:01 2010
I believe that there is so much scope to expand into the manufacture of services driven products in India and it high time the Indian entrepreneur move out of our comfort zone.
China and Chinese companies have been more active.
The growth in building industry for example is limited to a great extent to just building houses. The building of hospitals, schools, community centers and the such is not increasing at the same rate. In many states the growth of infrastructure to support developments is non-existent.
The time to move into this area is urgent and this time of economical downturn is the right time to do it.
Now is the time for India to move ahead
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