Economy to depend on Central spending

Mumbai: The economy will continue to depend on government spending for its survival in 2017 as private investment is in a ‘no investment’  mode.

Demonetisation has not affected the infrastructure sector except for cement because of the wait and watch situation on the real estate front. Potential, home buyers are waiting for prices to come down and real estate moghuls are trying to hold out in the hope of not having to cut prices.

Steel too would have been affected along with cement but government spending on the railways has kept steel consumption positive, said Madan Sabnavis chief economist, Care Ratings. Steel grew 8.2 per cent in the April to November quarter compared to a negative 1.5 per cent in the corresponding period last year.

What is significant about the growth between April-November 2016 is that whilst the core sector saw coal and crude oil production plummet to 1.6 per cent and –3.5 per cent in April-November 2016-17, fertilisers grew at a weak 4.5 per cent compared to 11 per cent in the corresponding period last year. Cumulatively growth is almost double over that of last year and would continue in this region till March.

The impact of demonetisation was to be less on infrastructure industries and more in the consumer goods spaces, with the exception of cement. Consumer spending which had been fuelling the economy for several quarters has taken a knock due to shortage of cash. This has also been reflected in the confidence index.