Govt: Manufacturing to revive as DeMo, GST effect wears off

New Delhi, September 23

The manufacturing sectors witnessing a slowdown should see a revival once the effect of demonetisation and goods and services tax (GST) wears off, Finance Ministry officials say.

The ministry believes the slowdown in manufacturing across sectors like gems and jewellery, electronics, textiles, chemicals, and pharmaceuticals sector is due to various reasons, including appreciation of the rupee.

The officials said the policy response had to be across the board, including interest rate, exchange rate and creating more demand. On interest rates, the government believed that there was scope for more monetary easing to boost demand.

“Once the effect of demonetisation and GST substantially reverses, we should expect those sectors picking up. But those sectors have been affected by appreciation of currency. So it’s combination of these one of the factors plus appreciation of currency,” Finance Ministry officials said.

This also partly explains the fall in the GDP in the last 2-3 quarters as manufacturing imports increased substantially, they say. The one good news going forward is that world exports volume has perked up quite significantly which should help in boosting growth in exports, officials say.

The big appreciation in rupee between January and April impacted both exports and imports, officials said, adding that the RBI had been intervening in the forex market for three months. — TNS