The FM’s call for industrial investment
Source: Hindu
GS III: Indian Economy

What is discussed under the FM’s call for industrial investment?

1. Current Scenario
2. Consumer Sentiment
3. Index for Industrial Production (IIP)
4. Consumer Confidence Index (CCI)

Why in News?

The finance minister has urged businesses to increase their investments in manufacturing as private investments have been hard to come by recently or are only present in a few industries.

Current Scenario

• The public sector is principally responsible for driving gross fixed capital creation.

  

• In contrast to the aim of 25%, the manufacturing sector’s contribution to the country’s GDP has also stayed constant for decades at around 16–17%.
• Consumption demand is now low (below the pre-pandemic level), but it is anticipated to increase.
• According to an online poll, there is strong interest in buying vehicles and two-wheelers, a diverging trend in real estate, and moderate interest in buying other consumer durables including computers/laptops, refrigerators, and air conditioners.
• The intention of households to save money is still high, with 56% of respondents saying they want to increase their savings by the end of the year.

Consumer Sentiment

• Private businesses only make investments when they can predict returns, which come from market demand.
• The consumer sentiment index from the Centre for Monitoring Indian Economy (CMIE) is still below pre-pandemic levels but significantly stronger than it was 12 to 18 months ago.
• Manufacturing companies saw a sequential increase in new orders, while infrastructure companies showed confidence in the state of their overall operations, turnover, and employment.
• The capacity utilisation rate has significantly improved since the pandemic when it had fallen to 67–68%.
• The manufacturing and production capabilities that are currently being used by a country or business are referred to as capacity utilisation.

Index for Industrial Production (IIP)

• The Index of Industrial Production (IIP) is a measure of the pace of economic growth experienced by various industry sectors over a predetermined time period.
• It serves as a composite measure of the economy’s overall level of industrial activity.
• The National Statistical Organization (NSO), Ministry of Statistics, and Programme Implementation produce and release IIP on a monthly basis.
• IIP uses 2011–12 as its base year to calculate the performance of the economy based on eight main industries.

Consumer Confidence Index (CCI)

• The Consumer Confidence Index (CCI) shows how optimistic or pessimistic people are about their anticipated financial status.
• Spending will increase if consumers are upbeat, but if they are pessimistic, a recession might result from their bad purchasing habits.
• CCI is essential for economic growth because consumers spend more when they are optimistic about the state of the economy and their personal financial circumstances.

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