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Sharp fall in capital goods production
14
Mar '08
The further decline in Index of Industrial Production (IIP) for the Month of January is a cause for concern, said CII in a press release issued.

The IIP growth during April – January 2007-08 has declined to 8.7% when compared to 11.2% IIP growth during 2006-7. Tight monetary policy resulting in high interest rates have been the major factor contributing to the decline in IIP growth, said CII.

CII notes that the decline in capital goods production is also a cause for concern, which came down to 2.1% in January 2008 when compared to a growth of 16.3% in January 2007.

The decline in capital goods production could be attributed to decline in growth of IIP of key sectors such as electricity and manufacturing and decline in production of consumer durables sector since April 2007.

The decline in growth of IIP particularly in manufacturing, electricity and consumer durables would have an impact on the investment decisions leading to decline in IIP growth of Capital Goods.

The further decline in consumer goods in the month of January 2008 to –3.1% and 1.7% for the period April – January 2007-8 is also a serious cause for concern.

CII believes that consumer durables sector is highly sensitive to demand conditions, which are currently under stress due to high interest rates.

The recent appreciation of the rupee has also made imports cheaper and has contributed to stock pileup for domestic producers thus leading to a lagged impact on production.

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