Mumbai, July 03: Indian industry is recovering from the economic slowdown, but the sector has to maintain its cost advantage in the emerging new global industrial order, a government report said.
India’s industrial output grew 2.4 percent in the year to March, compared with 8.5 percent in the previous year, hit by the global slowdown and a decline in domestic demand.
It rose an annual 1.4 percent in April after contracting three times in four months, government data showed.
Rising generation of electricity, improving cement dispatches and rising bank credit backed the view industry might have passed through the most severe part of the downturn, the government said in the Economic Survey for 2008/09.
“The sustained flow of FDI (foreign direct investment) also points to foreign investor confidence in the Indian economy, especially the Indian industry,” it added.
Declining prices of crude oil and of other inputs and cheaper credit would help industries improve profitability that had been squeezed in the fiscal year, the survey said.
With most of the developed world in recession, “the configuration of prices, output, and market size makes the Indian industry one of the few attractive destinations for investment.”
“The fact that India has a large domestic market with immense absorbitive capacity for industrial goods as also inputs for the development of infrastructure implies that the demand side provides scope for expansion,” the survey said.
The survey said that there were countries which could be dumping their goods into India, but the government’s response would have to be nuanced and ensure low input costs.
“Given the possible global restructuring of industry underway, it is critical for Indian industry to consciously build and maintain cost advantages.”
-Agencies