IS IIP growth sustainable?

This refers to your edit ‘Recovery Round the corner’ (ET,july13).The growth in IIP at 2.7%is encouraging, but will it sustain and grow further in the context of poor monsoon observed so far and not so encouraging budget is a major question. The borrowings of the government projected at Rs 4,51,000 crores will have adverse implications on private investments, interest rates and inflationary conditions. The time lag involved between investment and production also needs to be factored in for arriving at the IIP. To what extent the spending by the government on infrastructure, farm and social sector will create demand for industrial products is again dependent on several variables like employment generation, availability of credit at affordable rates etc. Besides domestic consumption and demand alone cannot contribute for enhanced IIP which require exports and imports to pick up considerably.

(Appeared in Economic Times 15 July,2009)

Dr.T.V.Gopalakrishnan