Industrial growth - The lurking danger - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Industrial growth - The lurking danger

Apr 12, 2000

The Central Statistical Organisation (CSO) must have been all smiles at the time of releasing the quick estimates for industrial growth for February 2000. Sorry to spoil the party but...Capital stock. It determines the productive capacity of an economy. It’s where savings of large number of individuals and corporate get channeled. And it is also a barometer of the economic environment - a bright future will stimulate investment activity, as investors would like to capitalise on future demand.

And as you might have guessed by now, that’s where the problem lies. The sluggishness in the capital goods sector highlights the fact that investment activity in domestic markets has yet to pick up (using imported capital goods is an open option, but forms only a small part of the total). As growth in both the gross domestic product (GDP) and industrial output has been robust, one comes to the conclusion that the revival is consumption led. The fact that various companies are cranking up production to meet demand points to the possibility that in future the demand supply gap may narrow, thus having price (inflation) implications.

A case in point is the cement sector. In two years’ time the sector is likely to witness a marginal deficit in output. Already expectations of higher price realisations have driven analysts to flag cement stocks as ‘BUY’ (that they have failed to appreciate is another matter).

The recent release fails to highlight this growing concern largely due to the fact that capital goods sector has little weightage in the index of industrial production. It is unlikely that slower growth in capital goods sector will jeopardize economic growth, as there are indications that investment activity may be about to take off. Indeed some will argue that a large number of sectors have surplus capacity and therefore there is no need to worry. Nevertheless, any failure on this front will have serious implications for the economy.


Equitymaster requests your view! Post a comment on "Industrial growth - The lurking danger". Click here!

  

More Views on News

BSE Sensex Surges 600 Points; BAJAJ AUTO Among Top Gainers (Market Updates)

Oct 1, 2020 | Updated on Oct 1, 2020

The BSE Sensex Surged 600 Points; BAJAJ AUTO Among Top Gainers. Find the latest update, special reports and news on all time high gainers of BSE Sensex at equitymaster.com.

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

Gold could Hit 40,000 Sooner Than Expected (Profit Hunter)

Aug 16, 2019

Domestic gold prices are firing on both engines now. Gold prices could touch 40,000 faster than you could imagine.

More Views on News

Most Popular

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

I Believe These Stocks Will Deliver the Most Outsized Returns in 2021 and Beyond (Profit Hunter)

Sep 23, 2020

Rules of the racetrack can help you bag the biggest gainers of the coming decade.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS