Growth in mining and quarrying sectors has nosedived to -2.2% in the current fiscal as opposed to 5% growth in last year. Construction sector is growing at 4.8% in 2011-12 against 8% clocked in the previous year.
Manufacturing industry comprising around 80% of the industrial output has notched 3.9% growth in the first 10 months as opposed to 9% growth same period of last year. The impact on steel consumption was direct as it has gone up by a meagre 4.7% in the first 10 months against a corresponding growth of 6.2% last year.
As the primary determinant of industrial expansion is investment, the past few years experience stands testimony to a secular fall in this regard. Gross fixed capital formation, the single indicator justifying industrial investment has reached 32.9% in 2007/08 and has been coming down to 32.3% next year, 31.6% in 2009/10 , 30.4% in 2010/11 and finally to 29.3% in the current year. Most notably, the share of private corporate sector has declined from 14.3% in 2007/08 to 9.9% last year, a clear fall of 4.4% in 3 years.
Corporate investment generally linked with Ebitda margin would wait for a perceived brighter scenario which, in the current situation, rests on a whole gamut of enabling policy framework.
Inflation has been curbed particularly in the food prices, much due to better supply scenario and less due to monetary intervention by RBI leading to rise in interest rate to rein in liquidity which in turn has made the prospective investors to adopt a wait and watch strategy.
With a rising import bill mostly on account of crude oil prices, and slow but impressive export growth, the current account deficit has already touched around 3.6% of GDP which may not be sustainable. Thus, on one hand domestic saving
options including insurance and mutual fund markets need further impetus and on the other India needs to attract more FDI in various sectors to bridge the fund shortage, enhance capacity utilisation and raise turnover from both domestic and export markets.
It is heartening to note that sovereign debt crisis in Greece is being fought by a united Europe belying the immediate euro crisis, although contagion risks still loom large even for India. In all likelihood the magic wand must commence operating from March 16th when the finance minister unveils the budget with a series of policy announcements of short and medium term perspective to raise market sentiments, attract investment via public, private and PPP route, facilitate FDI in specific sectors and create an enabling and participative environment to pass important policy steps through both houses of the Parliament.
It is amazing that industry is still looking for the return to happier days amidst an overall unfavourable climate.
The author is DG, Institute of Steel Growth and Development. The views expressed are personal