Even as the country braces for the Index of Industrial Production (IIP) for September 2008 (to be released on Wednesday) after recording the worst growth in recent times of a mere 1.3% in August, Federation of Indian Chambers of Commerce and Industry (Ficci) believes growth in industrial production can?t be attained if immediate measures to provide money to industry for pending pipeline projects are not taken soon.
Calling for boosting promotion activities in export markets, Amit Mitra, secretary general, Ficci told FE, ?We have to be hyperactive in accessing markets and not losing them. Once you lose a market, it takes at least 2-3 years to gain that market back.?
Mitra feels that the IIP is dependent on three things – greenfield projects, brownfield projects and working capital. One of the major reasons for the low IIP in recent months was that most industries were keeping away from the new projects, he stressed. These projects are stuck because of industry?s inability to finance them due to the tight liquidity crunch in the market.
The second factor for falling IIP is the lack in the business confidence among the industries. According to Mitra, many actions of the company are based on the perception of the future growth and the industries lacked that business confidence.
The third factor responsible for the low IIP is the high interest rates of the banks. The small and medium enterprises have suffered a big set back as banks have been giving credit to them at interest rates between 16-17%, straining their operational viability. Even big corporates also the interest rate was between 12-13%.
The fourth factor was the shortage of skilled workforce. 12 million people are added every year to the labour force and only 2.8 million have any kind of formal skills.