New Delhi: Buffeted by falling global and domestic demand, an increasing number of manufacturing sectors in India are reporting a contraction in production in the first three quarters of this fiscal from the year ago period, according to data from a survey carried out by business lobby Confederation of Indian Industry, or CII.
The survey carried out by CII’s association of agriculture, manufacturing and service councils, collectively called Ascon in short, reported that one-third of the 96 sub-sectors tracked registered a decline in production in the quarters gone by this fiscal when compared with the same period last year.
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In the last CII-Ascon survey, which looked at the first six months of this fiscal, 24% of sectors tracked said their production had declined.
The numbers act as a bellwether to manufacturing output reported by the Union government’s Index of Industrial Production, or IIP, which is usually reported with a lag of six weeks.
Growth rates in the CII-Ascon survey are based on data from member companies of CII and its affiliated associations. These companies and associations make up about 65% of total industry output in the country.
Manufacturing accounts for between 25% and 30% of India’s gross domestic product and CII on the weekend made its case for cuts in interest rates. “With inflation declining, conditions are favourable for further cut in interest rates to stimulate demand and help arrest further slowdown in the manufacturing sector,” said Chandrajit Banerjee, director general of CII in a statement.
The 96 sub-sectors tracked cover manufacturing activity in India such as the vehicle industry, watches and refrigerators, basic goods such as cement and fertilizer, and capital goods that include engines, boilers and electric motors.
The number of sub-sectors that recorded expansion by up to 10% remained almost the same at 45% in the three quarters when compared with 43% in the first six months of this fiscal. Those growing between 10% and 20% declined from 27% to 16%.
Trucks and buses were the worst hit as growth in production slowed by 24% for medium and heavy commercial vehicles. Commerical vehicle sales have fallen steeply in the last three months of this fiscal and companies such as Tata Motors Ltd, the country’s largest auto maker, have had their debt ratings cut.
Analyst firms such as Emkay Research have expect auto sales to continue to contract as financing continues to be scarce and expensive.
Pig iron, a key input in making steel, was the second worst affected and growth declined by 22%. Steel production declined only 1.7% as the country imported more scrap to be melted and made into steel.
Amid falling growth rates there were some sectors that bucked the trend and notched up impressive growth. For instance, sales of electric two-wheelers increased by 42.5% due to high petrol prices. Petrol prices have since been cut twice by Rs5 each in December and January. Other outliers included asbestos cement that grew by 32% and power pumps and transformers—both grew by 30%. Eleven of 23 export sectors surveyed reported negative growth.