The Finance Minister expressed surprise at the latest Industrial Production growth figures which is a paltry 1.6%, down from the double digit growth sometime ago. He has promised to dig deep into the reasons for this mess.
I am surprised that the FM is surprised!! You have a doubtle digit inflation, and you keep on rising the Lending Rates, and add to it the investor losing confidence in the stock market due to fear of which company is going to be exposed for corruption next, and you have a classic recipe for slowing down of industrial growth. The interest rates are almost reaching the 1980 proportions, a far cry from the promise made by P Chidambaram and the PM in the begining of the term of UPA 1 to bring the rates down to less than 3%. The high cost of capital (due to high interest rates) and the less disposable income available with the consumer (due to spiralling inflation) has finally started to slow down the economy. That industrial growth will be hit if you raise lending rates is fundamental economics. No sane businessman will invest when the cost of capital is high, especially when he has more avenues open overseas, where the cost of capital is very low.
The country and government is paying the price for the financial indiscipline of the UPA regime. Unless and until we practice fiscal prudence, we will not turn the corner. We are in for bad times...........very bad times.
