'Step up investment in unorganised sector'

NEW DELHI, DEC. 28. The current industrial growth trend indicates that the slowdown witnessed by the economy in the first half of the current fiscal will be reversed in the second half, an Associated Chambers of Commerce and Industry (Assocham) study has said.

``However, the extent of recovery in the second half of the year is limited by the second round of oil price hikes," an Assocham release quoting the study said. The slackening of investment in the unorganised manufacturing sector would also affect the recovery, it added.

Commenting on index of industrial production (IIP), Assocham said production had picked up by as much as 2.3 per cent over the last three months. The chamber said overall industrial growth had steadily gone up to 6.6 per cent in October from 4.3 per cent in August, terming this as the highest growth rate in the current fiscal.

The pick up in overall growth had extended to more sectors in later months, Assocham said adding ``the number of industries registering negative growth rates has gone down from six at the start of this fiscal to just two by the end of the first seven months." Industries registering negative growth in April included jute and other vegetable fibre (23.1 per cent), wood (8.3 per cent), transport equipment (7.5 per cent), paper (7.2 per cent), wool, silk and man-made fibre textile (1.7 per cent) and rubber, plastic, petroleum and coal (1.3 per cent).

The paper and the transport equipment sectors registered negative growth rates of 12.7 per cent and 11.1 per cent by April-October 2000 end, the study said. Assocham said non-metallic minerals and paper registered negative growth rate in October largely due to the share of fuel cost in production which was the highest in the industrial sector.

The transport equipment sector too registered a negative growth in October this year as oil prices had a significant impact on demand condition, the chamber said.

Given that the first oil price hike in March had already had a negative impact on the output levels in these sectors, the outcome of the second hike in prices in October this year was likely to further aggravate the situation in the later months, it said.

On the growth of basic goods sector, the association said it had witnessed a more than double growth rate to 10.3 per cent in October from 4.5 per cent in August this year. The consumer goods sector had gone up to 8.9 per cent from 6.5 per cent during August-October, it said.

The growth in consumer goods segment was fuelled by a pick up in non-durable segment where growth rates also more than doubled from 2.9 per cent in August to 6.2 per cent in October, Assocham said adding this was primarily due to improvement in rural incomes after the marketing of the kharif crop.

Expressing concern over the continuous decline in intermediate goods sector where the growth slumped despite an overall recovery in industrial output in August-October, the chamber said the growth rate for intermediate goods sector fell to 3.5 per cent in October from 7.3 per cent in August. Assocham said the overall investment in industrial sector was unlikely to improve without any significant improvement in unorganised sector investment, which stood much lower compared to the projection for 1997-2000.

Available figures showed that investment in organised manufacturing sector were as high as 83.8 per cent of the plan targets in the first three years of the Ninth Plan while the investment in unorganised segment stood at 50.2 per cent, it added. The chamber in its study felt that immediate steps should be taken to push up investment in the unorganised sector for the capital goods sector to flourish.

- PTI

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