Call for quicker realisation of infrastructure investment.
The Economic Survey has called for quicker realisation of infrastructure investment and a review of the labour laws for pushing growth in employee-intensive sectors. Growth of the manufacturing sector, which has a weight of 79 per cent in the Index of Industrial production (IIP), came down to 2.3 per cent last fiscal from 9 per cent in the previous year.
Overall industry sector recorded growth of 2.4 per cent in 2008-09 against 8.5 per cent in the year ago period.
The global financial crisis — which led to increased in raw material cost, a surge in the interest rates and a slackening in the demand from overseas market — pulled down the growth of manufacturing sector in the last fiscal, according to the Economic Survey 2008-09.
“The year has been marked by a very strong downturn in industrial growth due to the global financial shock that not only impacted the financing of industries but also their domestic and external demand,” the survey stated. “Almost all commodity groups, barring a handful, have been affected by the downturn,” it added.
According to the survey, inflation in the prices of commodities, including crude oil and ores, had an adverse impact on the profit margins for the manufacturing sector last fiscal.
Cost on account of consumption of raw materials by manufacturing industry rose by 38 and 44 per cent during the first and the second quarters of 2008-09, as compared to 16 and 12 per cent in the corresponding quarters of previous financial year.
A sudden freeze in the overseas credit also played a major role in pulling down the manufacturing sector’s growth as external finance accounts for a large chunk of the investment needs of domestic private companies, the survey stated.
The annual report card of the performance of the country’s economy also says that the shrinkage in demand for exports particularly in the second half of the fiscal sharply dented the performance of industries with high export intensity.
The survey said only two out of 17 industrial groups — beverages and tobacco and machinery — grew at robust rates during 2008-09 despite high base. Eight groups, including food products, rubber and cotton textiles, registered negative growth in the year.
