INDIA: Manufacturing sector performance moderates

MUMBAI: India's manufacturing sector performance has moderated during the first quarter of 2011 on rising inflation, higher input costs, monetary tightening measures of Reserve Bank of India, according to a survey by Confederation of Indian Industry- ASCON.

The CII ASCON survey is based on the feedback collected from more than 100 affiliated industry associations and interaction with the representatives of the associations and industry divisions representing more than 3500 companies. The respondents from various manufacturing related industry associations and companies cover a wide spectrum of sectors including Basic goods, Intermediate goods, Capital goods, Consumer Durables and Non Durables.

Out of 135 sectors covered by the CII ASCON survey, the number of sectors reporting excellent growth has declined while the share of sectors reporting high and moderate growth have increased. Sectors reporting more than 20% growth declined to 20.7% in April-June 2011 compared to 27.3% in April-June 2010 while the sectors registering high growth of 10-20% increased from 28.2% in April-June 2010 to 31.8% in April-June 2011 and the share of sectors reporting moderate growth of 0-10% increased from 29.0% to 42.2% during the same period.

At the same time, the share of the sectors registering negative growth declined significantly, indicating reduced stress. The share of these sectors declined to 5.2% in April-June 2011 from 15.5% in the corresponding period of the previous year.

An analysis of the data according to broad categories shows that consumer durables had the largest percentage of sectors in the excellent growth category followed by capital goods. On the other hand, consumer non-durables and basic goods performed poorly with a larger share of sectors in the high, moderate or negative growth segments.

Some of the sectors reporting excellent growth rates are Machine Tools (25%), Forgings (20.5%), switchgears (27.9%), Tractors (25.5%), LCVs (40.9%), Passenger cars (21%), Earth moving and construction equipment (24%).

Sectors recording high growth are Automobiles (19.4%), Energy meters (11.8%), Ball and Roller bearings (17.2%), Crude Oil (11%), capacitors (HT and LT) (15.2%), Scooters (17.5%), polyester staple fibre (13.4%) and Groundnut Oil futures prices Groundnut Oil (15.0%).

Sectors registering moderate growth of 0-10% in April-June 2011 include Caustic soda (6.3%), Fertilizer (9.2%), Refinery (5.6 %), Steel (5.5%), Polyester Filament Yarn (6.6%), Rubber Goods (6.5%) and Bus and Truck Tyre (8.0%).

Cement (-1.1%), Motors starters (-2.6%), Natural Gas (-9.5%), Sunflower Oil (-9.9%), Colour Picture Tube (-13.9%), LDPE (-8.0%) are some sectors that have shown negative growth rates in April-June 2011.

The survey also highlights some of the general and sector specific issues faced by the industry. The general issues include rise in the cost of raw materials, high cost of credit, infrastructure bottlenecks and availability of power, land acquisition and increasing oil prices. Some of the sector specific issues include import of second hand textile machinery and low priced bearings, unfair competition from spurious products pertaining to ball & roller bearing, hefty increase in imports of cold rolled sheets to the extent of 30% and retrospective levy of excise duty on parts and equipments used in Earth moving and Construction industry.

While some of these problems are being driven by global forces, the government could address some of the sector specific issues that are impacting industry and business. "The government and industry need to work together to regain the earlier growth momentum," said Mr. Banerjee.

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Added: July 11, 2011 Source: Commodity Online
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