Manufacturing industry experience moderation in growth in April-June 2011: CII

The performance of India’s manufacturing sector in the first quarter of the current financial is expected to moderate on the back of high inflation, increase in input costs and monetary tightening measures adopted by the Reserve Bank of India (RBI) to curb the inflation.

According to the survey conducted by the Confederation of Indian Industry (CII) and Ascon Corp, the number reporting excellent growth declined while the share of sectors reporting high and moderate growth increased. Sectors reporting more than 20% growth declined to 20.7% in April-June 2011 compared to 27.3% in April-June 2010 while the sectors registering high growth of 10-20% increased from 28.2% in April-June 2010 to 31.8% for current year and the share of sectors reporting moderate growth of 0-10% increased from 29.0% to 42.2% during the same period.

The CII and Ascon Corp survey is based on the feedback from more than 100 affiliated industry associations and industry division representing more than 3500 companies and covers almost 135 sectors such as basic goods, intermediate goods, capital goods, consumer durables and non durables. Chandrajit Banerjee, Director General, CII said, “High inflation, rising input cost and monetary tightening measures adopted by RBI are some of the reasons behind moderating growth in April-June 2011.”

According to CII survey, the sectors which showed excellent growth includes machine tools (25%), forgings (20.5%), switchgears (27.9%), tractors (25.5%), LCVs (40.9%), passenger cars (21%), earth moving and construction equipment (24%). Sectors which registered high growth between 10-20% includes automobiles (19.4%), energy meters (11.8%), ball and roller bearings (17.2%), crude oil (11%), capacitors (HT and LT) (15.2%), scooters (17.5%), polyester staple fibre (13.4%) and groundnut oil (15.0%). 

Sectors like caustic soda (6.3%), fertilizer (9.2%), refinery (5.6 %), steel (5.5%), polyester filament yarn (6.6%), rubber goods (6.5%) and bus and truck tyre (8.0%), showed moderating growth of 0-10% in first quarter of 2011-12. And the sectors like cement (-1.1%), motors starters (-2.6%), natural gas (-9.5%), sunflower oil (-9.9%), colour picture tube (-13.9%), LDPE (-8.0%) are some of the sectors that have shown negative growth rates in April-June 2011.

The survey also highlights some of the general and sector specific issues faced by the industry. The general issues include rise in the cost of raw materials, high cost of credit, infrastructure bottlenecks and availability of power, land acquisition and increasing oil prices. Some of the sector specific issues include import of second hand textile machinery and low priced bearings, unfair competition from spurious products pertaining to ball and roller bearing, hefty increase in imports of cold rolled sheets to the extent of 30% and retrospective levy of excise duty on parts and equipments used in Earth moving and Construction industry.