At a time when the Indian economy is performing relatively well, sluggish industrial output is a matter of concern. It has come down to a mere 4.5 per cent during the first three months of the present fiscal from a high of 12.9 per cent during the same period in the previous financial year. The fall in industrial output is indicative of the fact that the boom which was witnessed when normalcy returned after the prolonged pandemic period, is over now. Thus, the industrial sector is facing the challenge of creating demand in the market in-order to increase output. Without improvement in this sector, the speed of economic development in the country will be hampered and the dream of becoming a developed nation by 2047 may elude India. The industrial sector plays an important role in strengthening the economy by adding to increased growth rate, and reducing unemployment.
[bsa_pro_ad_space id=1]The sluggishness in the industrial sector is truly perplexing as the country is growing at a rate of six to seven per cent overcoming all odds. In accordance with the trend, industrial output is expected to contribute handsomely to the country’s economic growth. However, as the desired output is not being achieved, economists attempting to solve the issue are divided in their opinions. While a section claims that the recent growth of the Indian economy is the result of a spectacular showing by the service sector. Along with the service sector, the agriculture sector has also contributed generously, minimising the impact of weak industrial growth. On the other hand, another section of economists are arguing that high interest rates in lending has forced the industry to curtail output as the capital expenditure has gone up considerably. They have urged banks to slash the interest rate to inject new life into the industrial sector.
But the million dollar question is whether such an act will rejuvenate the industrial sector? Considering the global situation, such a possibility seems bleak as demand has fallen all over the globe. The fall in demand has hampered exports immensely, especially that of developing nations like India. So, the slump in industrial output may continue until global demand attains normalcy. Providing special relief to the industrial sector in the current economic climate without thorough consideration of all factors will not be a wise decision as lowering interest rate will increase inflation, a risk that the economy cannot currently take on. Steps should be taken to increase domestic demand by taking innovative steps. Until domestic demand is up, industrial output will remain less than expected, which is bound to create several problems including unemployment. It is crucial that both the Centre and state governments keep a regular vigil on the employment situation in the country to prevent large-scale unemployment from derailing the country’s economic progress. The government could also implement measures such as increasing social spending to mitigate the effect of limited industrial output.