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Consumer slowdown?

Consumer slowdown?
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First Published: Fri, Jun 08 2007. 01 16 AM IST
Updated: Fri, Jun 08 2007. 01 16 AM IST
Tata Motors, Bajaj Auto and Hero Honda are reportedly cutting back production of their two-wheelers and trucks. Most analysts believe that this is because higher interest rates are forcing buyers to postpone their purchases.
There are also signs that the production of consumer durables such as television sets have been hit in a similar fashion. The latest index of industrial production (IIP) shows that growth in the production of these durables has lagged that of other industries. These could be the first signs that consumer demand is slowing down in response to higher interest rates.
Meanwhile, C. Rangarajan, head of the Prime Minister’s economic advisory council, has said that investment spending continues to grow strongly despite the rise in the cost of money. This may augur well for long-term growth.
The upshot: investment is very clearly taking over from consumption as a driver of growth. In that sense, India now resembles China.
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First Published: Fri, Jun 08 2007. 01 16 AM IST
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