Disappointed with contracted IIP data, India Inc pitches for sops to boost consumption-driven demand

New Delhi: Disappointed with the 0.7 per cent contraction in industrial output, India Inc has pitched for incentives to boost consumption-driven demand for attracting fresh investments.

Remaining in the negative zone for the second month in a row, industrial production contracted by 0.7 per cent in August due to slump in manufacturing, mining and capital goods segments.

"The industrial output growth for August is a dampener with a huge drop in capital goods, meaning thereby the investment cycle is stubbornly stuck in a shell," Assocham Secretary General D S Rawat said.

He said even the manufacturing reporting degrowth and electricity not making any move is a matter of concern and the IIP scenario does not really gel well with the big picture target of 7.6 per cent growth.

"It is time to consider some serious measures to give boost to consumption driven demand, leading to new investment," Rawat said.

The factory output, measured by movement in Index of Industrial Production (IIP), had slipped to 8-month low of (-)2.49 (revised) in July on account of declining output in manufacturing and capital goods sectors.

The IIP slump in August is lower than July.

Vice President & Senior Economist at ICRA Aditi Nayar said consumption demand is set to improve appreciably in the coming months, with the kharif harvest forecast at record levels, revised pay and pensions being implemented by the Central Government and the impending festive season.

However, she said, while the confluence of such factors should support a higher volume growth in various consumer goods sectors in the second half of FY17, the impact of the same on the performance of the IIP may be muted by an adverse base effect for consumer durables.

"The depressed private investment climate and global economic growth continue to impact the manufacturing sector growth in India. Private investment activity remains sluggish and calls for sustained efforts to address the structural bottlenecks in the economy," Ficci Secretary General A Didar Singh said.

"Satisfactory monsoons, upcoming festive demand, recent cut in interest rates, have the potential to lift the growth in coming months," he added.