New Delhi: Stimulus packages notwithstanding, financial services firm Moody’s expects the country’s industrial production to register an annual contraction in 2009, primarily due to slump in exports.
“We may even see an annual contraction in industrial production this year... I am looking at a decline of about 1.5% year-on-year in February,” Moody’s economy.com economist Sherman Chan told PTI in a written statement.
Year 2009 began with industrial output contracting by 0.5%, highlighting that stimulus packages have failed to perk up the manufacturing as well as mining sectors so far.
The data for February will come next month.
Chan said more negative industrial growth is expected in the coming months and don’t see a solid rebound until early 2010.
After contracting for the first time in 16 years in October 2008, industrial production again shrank in December and January.
As such, the partial recovery in November proved an aberration.
In January, manufacturing sector growth turned negative by 0.8% and mining production fell by 0.4%.
Exports had a good run in the first half of 2008-09 growing by over 30%. But orders got cancelled and exporters found it difficult to get new bookings, thereafter, with demand slackening overseas due to global financial crisis.
As a result, from October onward, exports have been on decline, with export in January fell by 16%.
Moody’s expects that more stimulatory measures or supportive steps will be announced by the government in the coming months.
“This is needed not just for boosting the economy but also for sustaining sentiment, which is important as it affects consumption and investment,” it said.
To boost the economy, the government unveiled two fiscal stimulus packages in December and January, which included excise duty reduction and various other incentives across sectors.
Besides, as part of the interim budget, the government announced further cut in excise duty as well as reduction in service tax.