Weak Industrial Performance: Time Bound and Focused Reforms Essential for Revival of Business Sentiment : CII ASCON Survey

Weak Industrial Performance: Time Bound and Focused Reforms Essential for Revival of Business Sentiment : CII ASCON Survey.

Weak Industrial Performance: Time Bound and Focused Reforms Essential for Revival of Business Sentiment : CII ASCON Survey

The CII ASCON survey for July-September 2013 quarter indicates a scenario of subdued growth with green shoots of recovery continuing to be elusive in the near future. The Survey reveals that the number of sectors reporting negative growth in July-September 2013 quarter of the current year has increased significantly over the corresponding period of last year. This is despite the fact that the government has introduced various economic reform measures to seize the declining growth.

“This continuous deterioration in the economy since the last fiscal is reflective of downbeat sentiment within industry. With economic slowdown showing no signs of bottoming out in the near future, industry is cautious in moving ahead. This calls for a concerted effort from policy makers to stay the course on reforms. No doubt, the government has reiterated its support to industry in form of steps taken to accelerate rupee valuation, increase exports, rev up foreign investment, etc. However, the focus has to be on clearing projects and ensuring that once cleared the investments do take place.” said Mr Chandrajit Banerjee, Director General, CII.

The CII ASCON Survey, which tracks the growth of industrial sector on a quarterly basis, based on feedback received from sectoral industry associations, shows that out of 91 sectors surveyed, the sectors registering ‘low’ and ‘negative’ growth for July- September 2013 quarter remain significantly high at 84.61% as compared to 76.1% last year for the same period.

The number of sectors reporting ‘excellent’ growth (>20 %) show a bleak change by going up to merely 4.39% (4 sectors) in the current quarter (July-September 2013) as compared to 3.8% in July-September 2012.

The ‘high’ growth (10-20%) sectors have come down to 10.98% this year from 29.1% in the same quarter previous year.  

The proportion of sectors reporting ‘negative’ growth (less than 0%) has risen drastically from 15.5% in July-September 2012 to 38.46% in July-September 2013, the number of sectors having more than doubled to 35 from 16.  The number of sectors reporting low growth have shown a marginal decrease to 46.15%% from 51.4% same quarter last year.

The sharp rise in the sectors reporting negative growth is a cause of concern.

Another thing to note is the clear shift of number of sectors from high growth (30 sectors last year as compared to 10 this year) and low growth sector to negative growth (16 sectors in negative from last year has increased to 35 sectors).

This slowdown in the industry still remains despite several monetary tightening and fiscal consolidation measures by the government.

The Survey categorises the growth range in four broad categories, namely excellent (>20%), good (10-20%), low (0-10%), and negative (less than 0%).

The disaggregated analysis of the Survey reveals that most of the high and excellent growth has been registered by select segments of white goods segment driven by sales in rural/ tier 4 & 5 cities.

The Vehicle industry has witnessed a low to negative growth with most of the  segments such as motor cycles, 3 wheelers, utility vehicles, M&HCVs, tyres, cycle tyres, in these categories. However, scooter and Scooterettes along with tractors have witnessed a high growth

Some segments of White Goods industry such as refrigerators, air conditioners, small appliances registering about 12%-15% high growth rate.  The LCD/LED segment has been witnessing a boost and growth has been exceptional pegging above 20% mark. The rural purchase trends and sales in tier 4 & 5 cities have contributed significantly to this growth

The Basic goods sector has registered low growth this time with major segments like steel, fertilizer, paints, pig iron, and cement registering growth between 0-6 percent on an average.

The Consumer non durable sectors also fall under the low to negative growth with most of the sectors such as tea, edible oils, groundnut oil, Vanaspati, biscuits registering growth between 5-10%.

Consumer Durables like Rubber goods, Glass products also fall under low-negative category.

A similar trend was observed in the intermediate goods sector with segments such as motors, ball and roller bearings, synthetic fiber, yarn recording a low growth.

The Capital Goods industry continues to fall under low-negative growth. Sectors like machine tools, power cables, distribution transformer have fared poorly. Major segments in the capital goods sector expecting low / negative growth include earth moving & construction equipment, machine tools, distribution transformers, textile machinery, motors, relay control panels, power transformers, pumps. This in turn have an adverse impact on the downstream industries associated with these industries.

The sluggish performance of both producer as well as consumer goods indicate subdued demand conditions in the economy which going forward does not sound optimistic for revival of growth in the coming quarters as well.

The Survey respondents have raised concerns over the deteriorating macroeconomic conditions owing to multiple factors, both domestic and global. On the external front, global economic uncertainties, depreciation value of rupee, rising oil prices has contributed to the weak economic environment. These concerns have further contributed to the weakening of domestic economy leading to lowering investments, decline in exports, soaring inflation, stalled investments, and subdued consumption, among others. Respondents have stressed on the need for reviving the investments in the economy to boost demand.