IIP crash raises India Inc fear factor

India Inc wants RBI to cease and desist on its pro-active monetary tightening action.

The industry today said the plunge in industrial growth in November is “indeed a cause for worry” and it is time that tightening of monetary policy (undertaken by the RBI and opposed by India Inc),which jacks up interest rates,is stopped.

Industrial growth nosedived to a 18-month low of 2.7 per cent in November,2010 from over 11 per cent recorded in the previous month. A sharp deceleration was seen in the expansion for manufacturing sector.

“The slowdown in the manufacturing sector is indeed a cause for worry… I see hardening of raw material prices and rising cost of capital,as key factors impacting the growth of manufacturing in the coming months,” Federation of Indian Chambers of Commerce and Industry Secretary General Amit Mitra said.

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He hopes that the drop in industrial expansion would be taken into account while Finance Minister Pranab Mukherjee formulates the Budget for 2011-12.

The industry has been making out a strong case for continuation of the sops in terms of cut in excise,which were given following global slowdown in 2008-09.

Assocham President Dilip Modi said rising input cost has “eroded the profit margins and reduced incentives for expanding industrial activity”.

He said the dismal performance of consumer goods,particularly consumer non-durables,”is striking”. Modi said the industrial performance shows “fragility” of the sector facing “hyper inflation”.

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CII said it is disappointed with the sharp moderation in industrial growth.

“This should make the RBI more cautious about aggressive tightening at its forthcoming policy meet,” the chamber said.

It said food inflation should be tackled through supply-side measures.

“Concerns on inflation should be tackled on the supply side,given that it is being driven by a limited set of food items where bottlenecks in distribution are the root cause,” the chamber added.