Worried over persisting slump in the manufacturing segment, the commerce and industry ministry is working on a proposal on giving interest subsidy as part of its efforts to shore up growth in the sector.
"The Department of Industrial Policy and Promotion (DIPP) is discussing the proposal internally. In manufacturing, sectors which are doing very bad may get the benefit. Those areas will be decided during the meetings," an official told PTI.
The finance ministry will take final call to extend interest subvention benefits, he added. "The DIPP is considering an interest subvention of 3-4%. The department feels that the benefit should be provided for working capital needs," the official added. After recording a modest growth in the previous month, industrial output again slowed down sharply to 0.6 per cent in August mainly due to a contraction in manufacturing and mining.
The manufacturing sector, which constitutes over 75% of the index, contracted by 0.1% in August as against an expansion of 2.4% in the year-ago period.
As per the data, output of capital goods showed a decline of 2% during the month.
The official also said that National Manufacturing Competitiveness Council could be involved in the process "if something concrete comes in the meetings".
Experts said that interest subvention will definitely help the manufacturing sector. "It will help in reducing the capital cost of a plant. It is a welcome step. Government should think about this in a positive way," senior economist Rajiv Kumar said.