labels: Confederation of Indian Industry
CII sees 'green shoots' of industrial recovery news
11 May 2009

Spurred by three government stimulus packages in the last two quarters, the manufacturing industry seems to be showing signs of recovery. The number of sectors reporting high or moderate production growth in the last quarter of 2008-09 showed a slight improvement, according to a survey by the Confederation of Indian Studies.

The study, carried out by the CII body Association of manufacturing, agriculture and service councils (ASCON), showed that sectors such as fertilisers, pig iron, steel and mopeds moved from negative to moderate growth in production, which is defined as up to 10 per cent.

Others such as vanaspati moved from moderate to high growth (10-20 per cent) between the third and fourth quarter of financial 2008-09. Sectors reporting 'excellent' production growth of over 20 per cent include industrial gases, power transformers and electric two-wheelers. Other sectors such as cement, sponge iron, auto components, cars, scooters and motor cycles, and consumer durables continue to see moderate growth.

Sectors such as edible oils, medium and heavy commercial vehicles, light commercial vehicles, multi-utility passenger vehicles and capital goods reported a sequential production decline in the fourth quarter. The cautiously optimistic CII study warned against reading too much too soon, as on a year-on-year basis all sectors grew slower.

However, manufacturing growth still remains low on a year-on-year basis. While over 15 per cent sectors reported excellent growth in the previous year, only about 6 per cent did so in the fiscal 2008-09. Similarly, while about 6 per cent of the sectors reported decline in production in 2007-08, this increased to 30 per cent in the year ended March 2009.

''While on a yearly basis, the manufacturing sector has slowed down, there are some green shoots from a few sectors that have demonstrated a marginal pickup during the second half of 2008-09. These demonstrate a cautious optimism on signs of recovery,'' said CII director general Chandrajit Banerjee.

The survey reported that 18.75 per cent of the 80 sectors tracked showed high growth last fiscal compared with 15.63 per cent in the first nine months. The number of sectors that reported contraction in the same period was down 3 percentage points to 30 per cent.

Industry watchers view the numbers as forward looking as they are reported about six weeks ahead of the government's Index of Industrial Production and so act as a bellwether. Data pertains to about 65 per cent of the country's industrial output.

Export-dependent? industries continue to be under pressure, with half of the 22 export sectors surveyed reporting negative growth.

Significantly, pig iron, which is a key input in making steel, moved from negative growth to moderate growth between the third and fourth quarters of the last fiscal year. As a result, steel output also registered moderate growth. Fertilizers also fell in this category of moderate growth.

But when compared with the fiscal ended 31 March 2008, some of the differences in growth rates were stark. There was a sharp fall in growth of industries and services-from 15.38 per cent to 6.25 per cent. And those that registered negative growth nearly doubled to 30 per cent. Asbestos cement proved something of a dark horse, with production increasing by 21 per cent.

The mobile phone industry stood out, with a 34.24 per cent growth rate in the year gone by. India, the world's second largest phone services market by customers, has some 400 million subscribers.

Electric two-wheeler sales rose by about 36 per cent, but over a low base. Last year an estimated 100,000 electric scooters were sold in India.

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CII sees 'green shoots' of industrial recovery