Amid reports of 9% GDP growth expected in the new financial year beginning next month, apex chamber ASSOCHAM today warned about sliding industrial production due to rising fuel and other input costs.

Official data shows that growth of industrial sector fell to 6.4% in third quarter of current fiscal (October to December 2010-11) from 8.9% in second quarter. It was 11.3% in the first (April to June).

The Association Chambers of Commerce and Industry of India said that performance of capital goods sector reflects future industrial growth prospects. It tumbled from 36.3% in first quarter to 21.3% in second and 6.9% in third.

Mr Dilip Modi president of chamber said that “The government’s objective of raising industrial sector’s contribution to GDP from current level of 16% to 25% seems very ambitious at the moment. The short to medium term outlook is now a matter of concern.”

Declining industrial growth directly affects overall output and employment scenario besides aggravating supply side shortfalls. ASSOCHAM urged the government to closely assess the situation and pay focused attention to fix the problem.

Production trends of consumer non durable goods present another growth challenge. The sector registered minus 1.9% performance in third quarter of current fiscal compared to 1.5% growth in second quarter and 2.6% in first.

Mr Modi said that “This works against inflationary control measures of policy-makers. There has been a steady rise in input costs due to unabated increase in prices of primary articles and fuel. There has been no corresponding increase in prices of manufactured goods as shown by skewed growth in whole price index constituents.”

He said that the resulting pressure on profit margins despite higher turnover leads to a halt in fresh investments. Most industries have either postponed or cancelled their capacity expansions.