October 08, 2007
Abstract: Does the slowdown in industrial growth require policy interventions to create a more favourable environment? A disaggregated look at the performance of 17 industry groups provides three important insights. First, it is the case that no major group displays even a mildly positive trend and group specific factors have become more important as determinants of dispersion and volatility. Second, the decline was largely due to a sharp decrease in the growth rate in food and food products and wood and wood products, with a combined weightage of 15%. Third, investment-related sectors have also contributed to a slowdown as the investment cycle has reached its peak after a four-year upswing. To conclude, the data indicates that while the growth in manufacturing may be slowing, it has not yet moved to a broad-based decline that would justify a strong macroeconomic policy response.
Keywords: industrial growth; investment cycle; policy response