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Manufacturing sector to skid further on inputs costs, uncertainties in the global economy

A survey says India's manufacturing is expected to slow down further during the October-December quarter due to a rise in input costs and uncertainties in the global economy.

India's manufacturing sector that has moderated during April-September, 2011, compared to the year-ago period is expected to slow down further during the October-December quarter due to a rise in input costs and uncertainties in the global economy, says a joint survey by industry body Confederation of Indian Industry (CII) and Ascon.

"The manufacturing sector has observed moderation in growth during April-September, 2011, compared to the corresponding period of the previous year. The industry expects further moderation in growth in the third quarter - October-December, 2011," says the CII-Ascon survey.

Cost increase hit companies hard

"The number of sectors recording excellent and high growth is expected to decline and shift to moderate growth category," the survey says. Out of the 103 sectors covered by the survey, those reporting excellent growth of more than 20 per cent declined to 10.6 per cent in April-September, 2011 compared to 35.7 per cent in April-September, 2010.

During April-September 2011, 43.6 per cent sectors recorded moderate growth against 38.9 per cent sectors in the previous period. The percentage of sectors with high growth rate rose to 24.2 per cent in April-September, 2011 from 16.7 per cent in April-September 2010, the study says.

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The Index of Industrial Production (IIP) recorded a low 1.9 per cent growth in September, 2011, compared to 6.1 per cent growth recorded in September, 2010, marking the slowest pace of IIP growth since September, 2009. The IIP growth weakened for the third consecutive month in September, 2011 to 1.9 per cent from 9.5 per cent in June, 2011, 3.8 per cent in July, 2011 and 3.6 per cent in August, 2011.

The sectors registering negative growth rate have increased significantly to 21.3 per cent during the period under review, up sharply from 8.7 per cent in the year-ago period. This is a clear sign of decelerating growth. "High input and capital cost and uncertainties in the global economy are the major factors constraining growth of the manufacturing sector," said Chandrajit Banerjee, director general, CII.

"These issues need to be addressed at the earliest to help industry overcome the ongoing decelerating growth phase," he added.

The survey also indicates a further slowdown in growth with a rising number of sectors falling in the moderate category of growth of 0-10 per cent. Out of the 85 sectors covered by the survey for the period October-December, 2011, the percentage of sectors reporting excellent growth (over 20 per cent) is expected to fall to seven per cent, from 10.4 per cent in July-September, 2011 and 20.7 per cent in April-June, 2011.

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The sectoral classification shows that while categories such as basic goods, intermediate goods, capital goods and consumer non-durables have fewer sectors in the excellent and high growth brackets, consumer durables have a larger share of sectors growing at a high rate. The worst performing category of intermediate goods has the maximum number of segments that are expected to record negative growth. The survey says that sectors including earthmoving and construction equipment, tractors, scooters and scooter tyres will have excellent growth during the October-December quarter and the vehicle industry, tyre industry, machine tools, alcoholic beverages and biscuits will notch up high growth. Edible oil, cement, cold-rolled steel, nylon synthetic fibre, alkali and passenger cars will have moderate growth, followed by negative growth in newsprint, textile machinery, fertilisers, rubber goods, polyester synthetic fibre and natural gas, the study adds.

Courtesy: Mail Today 

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