"The sustained decline in the consumer goods sector along with dismal performance of the overall manufacturing sector and soaring interest rates are likely to keep the index of industrial production (IIP) growth restrained going ahead," research firm said in a report yesterday.
D&B sees January IIP to decline by 0.5-1.5 per cent. Last month the factory output, as measured in terms of the index of industrial production (IIP), had contracted by 0.6 per cent.
"The economy is facing its worst downturn with IIP contracting for the third consecutive month in December, highlighting sustained sluggishness in demand conditions and downturn in investment activity.
"Even as cyclical headwinds have eased of late, mainly on the external front, the domestic macro-environment remains challenging given rising interest rates, elevated inflation and weak consumption demand," agency said.
The report said although inflation in food and primary articles has moderated in the last few months on account of seasonal factors, elevated fuel prices and weak rupee are an area of concern.
Given the cut back on government spending, tight liquidity condition and higher policy rates, both short-term and long-term yields are likely to remain elevated, the report said.
Dion Global Solutions Ltd.