High interest plays spoilsport for Indian mfg: UNIDO
Frequent increases in interest rates for taming inflation have led to slowdown in India's manufacturing growth, dampening business confidence, a UNIDO report said today.
September 14, 2011 / 18:17 IST
Frequent increases in interest rates for taming inflation have led to slowdown in India's manufacturing growth, dampening business confidence, a UNIDO report said today.
According to the United Nations Industrial Development Organisation (UNIDO) report on trends in global manufacturing, growth in Brazil, India and Mexico slowed in the second quarter of calender year 2011, and remained below 5%."A slowdown of India's manufacturing growth seems to be related to successive increases in interest rates to combat inflation and a decline in business confidence," the report said.Battling above nine per cent growth, the Reserve Bank of India has hiked key interest rates 11 times since March, 2010 by 350 basis points. It is scheduled to review the rates again on Friday.As per the UNIDO report, the world manufacturing output grew by 5.2% in the second quarter of 2011, compared to 7.5% in the first quarter. It said beginning of the year expectations for a sustained recovery from the 2008 financial crisis "were dampened by a reduction in the dynamism of global private consumption and international trade".Tightening of fiscal policies amidst sovereign risks in some European countries led to financial market instability and rising inflation.In industrialised countries, manufacturing output rose by a mere 2.7% in the second quarter compared to 5.7% in the first quarter mainly because consumer spending did not offset the winding down of stimulus packages, fiscal consolidation and high commodity prices.Manufacturing growth markedly slowed in the US from 6.5% to 4.4% mainly due to meager growth in home building, low consumer durables and car purchases, rising input costs and poor employment generation that could not be compensated by a moderate pick-up in business investment.Led by China, developing countries posted a growth rate of 11.2% in the second quarter of 2011 compared to the same period of the previous year, even as India saw slowdown.Among developing countries China's manufacturing sector remained the fastest growing with an annualised rate of 14.3% and and a healthy 6.5% expansion in comparison to the first quarter of 2011, UNIDO said. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
