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New Delhi: Industrial growth slowed to a 20-year low of 1% in 2012-13, raising fresh worries about the health of the crucial sector despite a 2.5% rise in March on the back of signs of a
feeble revival in manufacturing and electricity sectors.
But the looming political uncertainty in the run-up to the general elections in 2014 could impact the strength of the tentative recovery and hurt growth which is estimated to have slowed to a 10-year low of 5% in 2012-13. The government expects growth in the current fiscal year (2013-14) to revive on the back of the reform steps announced since September and expects it to be close to 6%. But experts say continued policy logjam may upset plans.
The persistent slowdown in the industrial sector has hurt the government's plan to raise the share of manufacturing in the country's economy, and will deal a blow to the efforts to create millions of jobs.
Industry seeks urgent reforms
New Delhi: Data released by the Central Statistics Office (CSO) on Friday showed industrial output rose 2.5% in March compared to a decline of 2.8% in the same month a year ago. For the full year, industrial growth slowed to a paltry 1%, compared to a 2.9% expansion the year before, highlighting the heightened stress in the sector. Industrial output had plunged to 0.6% and the manufacturing sector fell 0.8% when India faced an economic crisis.
"History seems to be repeating itself. IIP (index of industrial production) data released today reveals that Indian industry's performance in 2012-13 is its worst showing in the past 20 years," ratings agency Crisil said in a note. "The current situation is reminiscent of the 1991-92 crisis when industrial output grew by a mere 0.6% whereas manufacturing output contracted by 0.8%," it added.
While policymakers were confident of growth bouncing back, economists and India Inc called for urgent policy reforms to remove the bottlenecks to growth in the industrial sector. India Inc also called for further moderation in interest rates to boost economic activity.
"This is exactly the trend we are hoping. If it (the trend) continues, inflation comes down and growth begins to pick up, I am quite confident that growth in the current fiscal will cross the 6% mark," economic affairs secretary Arvind Mayaram told reporters.
The CSO revised the February data to 0.5% from the previously reported 0.6%.
The industrial sector has been hit hard by stubborn inflation, high interest rates, policy logjam, delay in implementation of projects and the global economic slowdown. High input costs and shortage of power have also hurt the sector.
Crisil said a mild rise in consumption would aid recovery in the industrial sector, and called for early resolution of issues besetting the mining sector, saying it could provide some respite not only to the mining industry but also other industries such as power generation. The capital goods sector, a key indicator of industrial activity, rose 6.9% in March compared with a 20.1% decline in the year ago month. This was the second consecutive expansion in the capital goods sector which had witnessed sharp volatility in the previous months. Economists said the easing of monetary policy and clearances of pending projects should help in a modest recovery in the sector.
"We maintain our view of a shallow recovery to 5.7% in 2013-14 versus 5% in 2012-13. This factors in the RBI easing rates by a further 50 basis points, a pick-up in consumption as 2013-14 is a pre-election year and lower rates (that) could help consumer durables; a marginal uptick in investments, which rests on continued government efforts — both policy change and execution," said Rohini Malkani, economist at Citigroup India.Indian industry stepped up calls for faster reforms and clearances to boost growth. "Looking at the financial year 2012-13 data, it is evident that the growth in manufacturing is constrained by shortage of power and subdued growth of core sectors of the economy. Electricity growth has decelerated to just half of what it was in 2011-12, which is a cause for concern," Ficci president Naina Lal Kidwai said.
feeble revival in manufacturing and electricity sectors.
But the looming political uncertainty in the run-up to the general elections in 2014 could impact the strength of the tentative recovery and hurt growth which is estimated to have slowed to a 10-year low of 5% in 2012-13. The government expects growth in the current fiscal year (2013-14) to revive on the back of the reform steps announced since September and expects it to be close to 6%. But experts say continued policy logjam may upset plans.
The persistent slowdown in the industrial sector has hurt the government's plan to raise the share of manufacturing in the country's economy, and will deal a blow to the efforts to create millions of jobs.
Industry seeks urgent reforms
New Delhi: Data released by the Central Statistics Office (CSO) on Friday showed industrial output rose 2.5% in March compared to a decline of 2.8% in the same month a year ago. For the full year, industrial growth slowed to a paltry 1%, compared to a 2.9% expansion the year before, highlighting the heightened stress in the sector. Industrial output had plunged to 0.6% and the manufacturing sector fell 0.8% when India faced an economic crisis.
"History seems to be repeating itself. IIP (index of industrial production) data released today reveals that Indian industry's performance in 2012-13 is its worst showing in the past 20 years," ratings agency Crisil said in a note. "The current situation is reminiscent of the 1991-92 crisis when industrial output grew by a mere 0.6% whereas manufacturing output contracted by 0.8%," it added.
While policymakers were confident of growth bouncing back, economists and India Inc called for urgent policy reforms to remove the bottlenecks to growth in the industrial sector. India Inc also called for further moderation in interest rates to boost economic activity.
"This is exactly the trend we are hoping. If it (the trend) continues, inflation comes down and growth begins to pick up, I am quite confident that growth in the current fiscal will cross the 6% mark," economic affairs secretary Arvind Mayaram told reporters.
The CSO revised the February data to 0.5% from the previously reported 0.6%.
The industrial sector has been hit hard by stubborn inflation, high interest rates, policy logjam, delay in implementation of projects and the global economic slowdown. High input costs and shortage of power have also hurt the sector.
Crisil said a mild rise in consumption would aid recovery in the industrial sector, and called for early resolution of issues besetting the mining sector, saying it could provide some respite not only to the mining industry but also other industries such as power generation. The capital goods sector, a key indicator of industrial activity, rose 6.9% in March compared with a 20.1% decline in the year ago month. This was the second consecutive expansion in the capital goods sector which had witnessed sharp volatility in the previous months. Economists said the easing of monetary policy and clearances of pending projects should help in a modest recovery in the sector.
"We maintain our view of a shallow recovery to 5.7% in 2013-14 versus 5% in 2012-13. This factors in the RBI easing rates by a further 50 basis points, a pick-up in consumption as 2013-14 is a pre-election year and lower rates (that) could help consumer durables; a marginal uptick in investments, which rests on continued government efforts — both policy change and execution," said Rohini Malkani, economist at Citigroup India.Indian industry stepped up calls for faster reforms and clearances to boost growth. "Looking at the financial year 2012-13 data, it is evident that the growth in manufacturing is constrained by shortage of power and subdued growth of core sectors of the economy. Electricity growth has decelerated to just half of what it was in 2011-12, which is a cause for concern," Ficci president Naina Lal Kidwai said.
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