Posts Tagged ‘Growth’

Indian Corporates Pitched For a Cut in Interest Rates :)

Softer Interest Rate Regime

Stating that it was essential to maintain the growth momentum, India Inc described 6.8% rise in July industrial output as “evidence of recovery and pitched for a cut in interest rate.

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However, although performance in July has been lower than the previous month, vigorous increase in mining and manufacturing has kept up the level of industrial growth at a reasonable level of 6.8%.

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Additionally, it is said that the industrial economy is passing through a very important stage and FICCI has as a result advocated the need for a softer interest rate regime to assist the overall growth process and promote investments.

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“Although performance in July has been somewhat lower than the previous month…nevertheless robust growth in mining and manufacturing have kept up the level of industrial growth at a reasonable level of 6.8 per cent,” Ficci Secretary General Amit Mitra said in a statement.

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On the other hand, the RBI had cut reverse repo and repo rate by 25 basis points each in April whereas in June, the factory production was revised to 8.2% against 7.8% anticipated provisionally.

Moreover, Assocham stated that in future, the force of stimulus packages would also add on to the revival and India could move on to a close to 6.5% of GDP in the present financial year.

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Industry Life Cycle

Industry life Cycle

In general, an industry will traverse through 5 stages:


1. Pioneering development:

It is characterized by modest sales growth and huge development costs.

Consequently, profits are either negligible or are in fact negative.

2. Accelerating Growth:

At this point, the industry product is gaining wider acceptance.

Hence, it is very likely that demand for this new product is outstripping supply, as the number of firms in the industry is still relatively low.

Consequently, profit margins will tend to be very high for the existing firms.

3. Mature Growth:

The abnormal high profits of the previous stage will likely attract new entrants into the industry.

As a result, supply will begin to catch up with demand, just as the growth in sales stops accelerating.

4. Stabilization (or Market Maturity):

At this stage, both supply and demand stabilize such that the growth rate of the industry now matches that of the economy as a whole.

This phase tends to be the longest of all the industry life stages because in this phase, there is neither an incentive for new firms to enter the industry nor an incentive for existing firms to exit it.

5. Decline:

As new products are introduced from other industries, the demand for the target industry’s product will begin to decline.

As a result, profitability will begin to deteriorate.