New Delhi: Stating that many sectors, particularly the manufacturing, have seen a big fall in production due to slowdown in demand, industry body Assocham has asked the government and RBI to take more initiatives to revive growth.
"While the Finance Ministry has taken some encouraging steps to revive the investment sentiment, the efforts have to be supplemented by the RBI and different wings of the government," industry body Assocham said in a study.
The study said the Indian industry has been thrown in a vicious circle as investment is declining fast coupled with contraction in demand, thus necessitating some big initiatives both from government and RBI.
"An analysis of the Index of Industrial Production (IIP) for September, the industry body said, has shown that close to a dozen sectors have seen massive drop in output because of big fall in consumer demand," it said.
The overall trend is visible in worsening conditions in the capital goods sector, which saw a degrowth of 12.2 percent in September this fiscal, Assocham said.
Capital goods sector--a kind of index of the investment appetite in the industry-- has been in the trouble for over a year that witnessed a decline of 6.5 percent in September, 2011, it said.
"Instead of improvement, the capital goods sector has seen deterioration throwing a major challenge for the Indian economy," Assocham President Rajkumar N Dhoot said.
Also the manufacturing sector, which is the biggest creator of jobs in the industry has slipped into negative territory posing serious threat to employment, he said.
"For reviving investment the consumer demand is required, which itself is showing sluggish trend. The consumer demand is a function of increased employment which can be generated by increased employment," the study said.
Dhoot said lakhs of jobs are at stake for which there is a need to kick-start the economic activity again and demanded for a big cut in interest rates.
"...Once the investment resumes and supply side is taken care, inflation would surely drop to a level where the growth is sustainable," he said.
Assocham said a large number of projects involving several crores of rupees are stuck because of environment hurdles or other regulatory issues. Land acquisition remains a sticky area for the investors who want to put in money in the manufacturing sector.
"We are hopeful that the initiative like the National Investment Board would materialise soon. That step would be critical in reviving the investment sentiment in the entire infrastructure space."