Positive Industrial Growth Brings a Ray of Hope to Manufacturing Sector

Ray of hope to manufacturing sector

After a prolong period of declining growth and sluggish investment, the industrial activities seem to be picking up and green shoots in manufacturing sector are finally visible.

The CII Associations’ Council Meeting concluded on 6th August 2014 in New Delhi released the findings of the ASCON survey conducted every quarter and presented the growth of the industrial growth for the April-June 2014 quarter.

The Survey indicates that the industrial activity in the country has posted a positive growth. This is a clear shift from the growth trends witnessed during the last quarter (Jan-March 2014), which presented a dismal industrial growth.

The positive growth in important sectors within the consumer durables including the vehicle industry, white goods industry, recording a growth between 5% – 10%, have largely been responsible for improving the overall industry growth. Sub sectors such as tablets, LED’s and LCD’s, smart phones have achieved phenomenal growth of above 20%. The passenger car segment also, for the first time in last two years, has grown between 5-10%. However, core sectors continue to remain under stress lying in the low growth category. The capital goods sector too, has shown stability in its growth (0%-9%), which also improves the overall industry sentiment.

The CII ASCON Survey categorises the growth range in four broad categories, namely excellent (>20%), good (10-20%), low (0-10%), and negative (<0%) and for this quarter covered 111 industry segments.

According to the survey, number of sectors showing high & excellent growth (10% and above) have increased from 15 in last quarter in Jan-March 2014 to 24 (21.42% of the overall industry segments surveyed) in the quarter April-June 2014.

Commodities such as LEDs/LCD, tablets, air conditioners, smart phones, sugar, ground nut oil, DAP and NP/NPK have shown excellent growth i.e. above 20 percent. Commodities such as 2 wheelers, motorcycles, refrigerators, washing machines, scooter tyre, tractor tyre, rubber hose, rape seeds and mustard seeds, biscuits, domestic cargo, fertilizer, industrial valves, nylon tyre yarn have recoded a growth between 0%-9 percent.

There is no change in the number of sectors that have registered a low growth rate (0-10%. 58 industry segments (51.78% of the overall industry segments surveyed) have reported a low growth rate (0-10 percent) in April-June 2014.

Commodities such as passenger vehicles, utility vehicles, tractors, textile machinery, industrial gases, Motors (LT), capacitors, Nylon filament yarn, machine tools microwave ovens, audio home theatre, personal computer, bus & truck tyre, industrial tyre, float glass, rubber footwear, drug pharma, alcoholic beverages, electricity, etc have fared low growth (0%-9%), whereas commodities such as commercial vehicles, newsprint, crude oil, power cable, auto component, pumps, energy meters, etc have registered a negative growth.

The good growth of automobile industry is driven by the excise duty cuts announced during the interim budget and its extension during the recent budget of the new government. The excise duty stimulus also comes as a respite to the capital goods sector as well as the white goods sectors.
In spite of overall marginal positive growth, 30 industry segments (26% of the overall industry segments, surveyed) continue to have a negative growth rate, a cause of worry. Further, core sectors such as steel, cement, natural gas, crude oil continue to remain under stress and in the low – negative growth category for the 5th consecutive quarter. This is due to lack of derived demand, stalled mining activities and delayed clearances of projects and investments and in these sectors.
It is heartening to note a positive change, though marginal, in the manufacturing growth in the 1st quarter (April-June 2014) of the current financial year 2014-15.

As per CII ASCON Survey, as high as 24 industry segments have registered a growth rate of more than 10% in the 1st quarter (April-June 2014) and 58 industry segments continue to be in the growth trajectory of 0-10%.

With new government taking over the charge and several policy measures underway, including an excellent pragmatic budget, there is a marked positive change in the overall sentiments. Industry is sincerely hoping that some of the challenges that have dragged the growth rate in the past, such as lack of domestic demand, high interest rate, infrastructure bottlenecks and inverted duty structure would be addressed soon, leading to a revival and buoyancy in industrial activities” Mr. Chandrajit Banerjee, Director General, CII

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