The Short Names

TO BE PUBLISHED ON MONDAY

24^TH AUGUST 2009

 

INDUSTRIAL RECOVERY NOT COMPLETE: CII M-ASCON SURVEY

CII PROJECTS GDP GROWTH OF 6.5-7.0% FOR 2009-10

 

CII mAscon survey carried out for the period April – June 2009 over the period April – June 2008 reported a greater number of sectors in the excellent growth category. When compared with survey results for the period April 08 – March 09 (FY 2009), the number of sectors in both excellent and high growth category has recorded an increase reflecting that industry is building on marginal signs of recovery that was reported in the last survey done for the period April 08-March 09. However, while 18 sectors moved upward to higher growth levels on y-o-y basis, 23 sectors moved downwards to lower growth. Out of these as many as 18 sectors moved down to negative territory.

 

Dr Surinder Kapur, Chairman CII Manufacturing Council said that the concern is the increase in the percentage of sectors in the negative category to 39.0% this quarter compared to 21.0% in Q1 FY2009. And it is not just a year on year figure as the number of sectors reporting negative growth has seen an increase even when compared with results for the full year FY 2009.

 

The complete industrial recovery is still some time away as reflected by the survey This means that industry would need various measures announced by government in the stimulus package and Union Budget to continue at least till 31March 2010, said Dr Kapur.

 

In the current survey excellent growth was reported by 10.4% of the 77 sectors reporting production as compared to 7.0% last year same period as shown in the table below. For FY 2009, percentage of sectors showing excellent growth was 6.3. In Q1 2010, 22.1% of sectors had reported high growth as compared to 18.8% for FY 2009.

 

Growth Trend of Manufacturing Sector for Q1, H1 2009 & FY 2009 (Figures in percentage)

Growth	April- June 2009	April 08– March 09 (FY 2009)	April – Sep 2008	April- June 2008
Excellent (More than 20%)	10.4	6.3	6.9	7.0
High (10%-20%)	22.1	18.8	26.7	40.0
Moderate (0-10%)	28.6	45.0	42.6	32.0
Negative (less than 0%)	39.0	30.0	23.8	21.0

 

The sectors reporting excellent growth are Industrial gases like argon, nitrogen and oxygen; Automobile sector like scooters, mopeds, MPV’s etc.  Sectors in high growth are cement, fertilizer, motor starters, capacitors, industrial gases like carbon dioxide and hydrogen; Consumer durables like refrigerator, air conditioners, washing machines, microwaves ovens and consumer non durables like alcoholic beverages and edible oil like rape/mustard oil.

 

Other sectors such as nylon filament yarn, polyester filament yarn and polyester staple fibre from synthetic fibres, auto industry, including all three wheelers, motor cycles; bus/truck tyres, edible oils like groundnut oil; electric fans were in moderate growth category.

 

The sectors that have inched forward from negative to moderate growth in Q1 2010 in comparison to the corresponding period last year are Polyester staple fibre, all three wheelers, edible oils and nuclear energy. Phosphate fertilisers and mopeds managed to get foothold in the excellent growth this quarter.

 

Transformers, power transformers, electric two wheelers moved down to negative territory in Q1 2010 from excellent growth in the same period last year. Soya, transmission line towers, electric motors, circuit breaker, switch gears, power cables, vanaspati and fluid power components also moved to negative zone in Q1 2010 from  moderate and high growth in the corresponding period last year.

 

Other sectors reporting negative growth are basic goods like caustic soda, cold rolled steel strips. In the intermediate goods, energy meters, ball and roller bearings, industrial valves, fluid power components and textile machinery, machine tools etc in capital goods reported negative growth. 

 

All sectors that reported production in the Capital goods category have recorded negative growth this quarter which is a big concern. Some of the sub sectors of capital goods have reported negative growth to the extent of (–) 48%.

 

According to CII’s report on the State of the Economy, the growth outlook has improved from what was envisaged earlier. Thus GDP growth for 2009-10 is projected at 6.5 – 7.0 percent. This is based on sectoral growth rates of 1.0 – 2.0 percent in agriculture, 6.0 – 6.5 percent in industry and 8.4 – 8.7 percent in services.

 

Corporate results for the first quarter of the current fiscal also showed some incipient signs of stabilization. The corporate results available for a sample of 515 companies (307 manufacturing sector and 208 service sector) for quarter ending June, 09 revealed that the net sales growth has slowed down while net profit growth has improved. The growth in net sales moderated to 4.2% in the quarter ended June 09 from 5.0% in the previous quarter. However, as a result of decline in cost of raw materials and power and fuel and moderation in growth of interest expenses the net profit grew strongly by 26.0% in the June quarter after having contracted by (–)7.2 percent in the previous quarter.

 

“Amidst optimism that the worst may be behind for the Indian economy, there are some major challenges that lie ahead for the economy,” said Mr. Banerjee. One of those is the revival of Indian exports, which have declined on an average by 23 per cent since October ’08. Exports grew at just 2.4 per cent during 2008-09, down from 28.9 percent during 2007-08. The trend continues in April-June 2009 as exports declined by over 31 percent, year-on-year.

 

Another major challenge would be fiscal consolidation. The report points out that as a step towards fiscal consolidation, divestment can clearly be one of the routes to bridge the gap of excess expenditure over government’s revenue. It will allow the government to stimulate the economy while resorting to less debt market borrowing and there would be less possibility of crowing out of private borrowers as well.

 

Finally, the challenge is to sustain the recovery that is still at a nascent stage. Although inflationary expectation have not eased especially in light of the weak trend in rainfall, monetary policy must remain accommodative. Even if the RBI is unwilling to reduce policy rates further at this point, all efforts must be made to enhance the transmission mechanism so that the interest rate paid by actual borrowers remains low.

 

New Delhi

 

Neelam Joshi

Media Desk

Confederation of Indian Industry

23, Institutional Area

Lodi Road

New Delhi – 110 003

Mobile: 9810882431

 

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