Gowth of Business in India

Industry
Though the growth of the industrial sector started to slowdown in the first half of
2007-08, the overall growth during the year remained as high as 8.5 per cent. The industrial sector witnessed a sharp slowdown during 2008-09 as a consequence of successive shocks, the most important being the knock-on effects of the global financial crisis. The pace of slowdown accelerated in the second half of 2008-09 with the sudden worsening of the international financial situation and the global economic outlook. The year 2008-09 thus closed with the industrial growth at only 2.4 per cent as per the Index of Industrial Production (IIP).

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8.2 The slowdown in manufacturing over successive quarters started from Q1 of 2007-08. This was more or less replicated by the mining sector and closely followed by electricity. However, in the third quarter of 2008-09, the manufacturing sector witnessed a sharp drop in growth which turned negative in the fourth quarter. Growth of the mining sector declined over successive quarters of 2008-09 to reach a zero rate in the fourth quarter.

DEVELOPMENTS THAT IMPACTED THE INDUSTRIAL SECTOR
8.3 In view of the fact that industrial growth started to moderate from the first quarter of 2007-08, its growth performance needs to be viewed in light of the developments during that year and during the preceding year (Table 8.1 and Figure 8.1).

price of crude had started to impact petro-based industrial inputs adding to fuel costs. That apart, the rise in the price of other commodities, particularly metals and ores from the latter half of 2006-07 to the second half of 2008-09 also had its effect on the cost side of the manufacturing sector. Though some units engaged in the extraction or exports of commodities (like iron ore) realized higher profit margins, the commodity price inflation had an adverse impact on the profit margins for the manufacturing sector in general.

Table 8.1 : Growth of IIP. March 2009
(per cent)... [continues]

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