Disappointed with the 0.7 percent contraction in industrial output, India Inc has pitched for incentives to boost consumption-driven demand for attracting fresh investments.
Remaining in the negative zone for the second month in a row, industrial production contracted by 0.7 percent in August due to slump in manufacturing, mining and capital goods segments.
“The industrial output growth for August is a dampener with a huge drop in capital goods, meaning thereby the investment cycle is stubbornly stuck in a shell,” Assocham Secretary General D S Rawat said.
He said even the manufacturing reporting degrowth and electricity not making any move is a matter of concern and the IIP scenario does not really gel well with the big picture target of 7.6 percent growth.
“It is time to consider some serious measures to give boost to consumption driven demand, leading to new investment,” Rawat said.
The factory output, measured by movement in Index of Industrial Production (IIP), had slipped to 8-month low of (-)2.49 (revised) in July on account of declining output in manufacturing and capital goods sectors.
The IIP slump in August is lower than July.
Vice President & Senior Economist at ICRA Aditi Nayar said consumption demand is set to improve appreciably in the coming months, with the kharif harvest forecast at record levels, revised pay and pensions being implemented by the Central Government and the impending festive season.
However, she said, while the confluence of such factors should support a higher volume growth in various consumer goods sectors in the second half of FY17, the impact of the same on the performance of the IIP may be muted by an adverse base effect for consumer durables.