Analyzing the Industrial & Business Growth

Analyzing the Industrial & Business Growth

Govt. says that policy framework is creating a conducive business environment, Policies are strengthening infrastructure network and ensuring availability of required inputs. But on the contrary, industry bodies are having some other opinion on the subject of industrial growth. They talk about economic struggle, writes Faiz Askari.

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Compiled by Faiz Askari

The Government is continuously taking steps to boost industrial growth including infrastructure sector which includes putting in place a policy framework to create a conducive business environment, strengthening infrastructure network and ensuring availability of required inputs. But on the contrary, industry bodies are having some other opinion on the subject of industrial growth.

“Foreign Direct Investment (FDI) policy and procedures have been simplified and liberalized progressively. The Government has also taken up a series of measures to improve Ease of Doing Business. The emphasis has been on simplification and rationalization of the existing rules and introduction of information technology to make governance more efficient and effective. The overall growth of the infrastructure industries is the interplay of many factors such as capacity utilization, investment cycle, seasonal factors, policy interventions, domestic and global growth outlook,” a written statement issued from the Government has mentioned.

On the other hand, recently, leading industry body Assocham has categorically mentioned that key infrastructures sectors have been witnessing degrowth, rather any uptick, showing a disconcerting scenario, marred by the twin balance sheet problems of the banks and the corporate firms. For instance, in the Financial Year 2017-18, the credit deployment growth in the power sector was minus 1.1 percent, telecom minus 0.6 percent, roads minus 7.5 percent, cement and cement products minus 3.1 percent.
In the absence of any demand for credit and even the risk aversion by the lenders, the tendency on the part of the banks has been that of a “herd”, as rightly pointed out by RBI Deputy Governor Mr N S Vishwanathan.
Cautioning the banks, he recently stated, “There appears to be taking hold a herd movement among bankers to grow retail credit and the personal loan segment. This is not a risk-free segment and banks should not see it as the grand panacea for their problem riddled corporate loan book. There are risks here too that should be properly assessed, priced and mitigated.”

However, As per the Index of Eight Core Industries (ICI), the details of growth of index of eight core industries viz. Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity for the year 2017-18 over the year 2016-17 are given in the table below:

 

Growth rate of Index of Eight Core Industries (in %) (base year 2011-12)
Year Coal Crude Oil Natural Gas Refinery Products Fertilizers Steel Cement Electricity Overall Index
2017-18 2.6 -0.9 2.9 4.6 0.03 5.6 6.3 5.3
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