India’s industrial sector is likely to witness a slowdown and will remain in single digit throughout this year, as the country faces various headwinds like appreciating rupee, poor infrastructure and rising borrowing costs, global credit rating agency Moody’s said.

“The combination of softer domestic and decelerating external demand, particularly from the US — India’s largest export market — is expected to weigh heavily on India’s industrial sector in the coming months,” Moodys Economy.com Director Asia Pacific Economics Ruth Stroppiana said.

Lackluster performance of manufacturing and mining, coupled with poor output of consumer goods sector, has pushed the country’s industrial growth rate to 7.6 per cent in December 2007 from 13.4 per cent in the same month a year ago. “We expect India’s industrial sector to slow in 2008, as near decade high borrowing costs would weigh on demand for locally produced interest rate-sensitive goods, particularly consumer durables. The annual industrial output growth will remain in the single digit throughout most of 2008,” Moodys Economy.com said in its latest report.

Less appealing

Meanwhile, the steady appreciation of the rupee would affect the country’s export-related production, Moody’s Economy.com said in a latest report. This makes Indian products less appealing in the global marketplace, it added. In 2007, the rupee rose 12 per cent against the dollar. Besides, Moody’s said high level of government ownership and  restrictions on foreign investment  would create roadblocks for the industrial sector.