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Industry performance expected to decelerate in Q1 - CII ASCON

The CII ASCON Survey for the period April to June 2012 (estimated) reveals sharp deceleration in the growth of industrial sectors as compared to the corresponding period of the previous year, on the expectations of low investment spending, rupee depreciation, elevated inflation, high trade and fiscal deficits, and uncertain global economic recovery.

Mr Chandrajit Banerjee director general of CII said that “The ASCON Survey provides Industry Outlook for the period April to June 2012 compared to April-June 2011. The survey reveals that many Industry sectors have shown a sharp deceleration in growth for April to June Quarter (Q1) of 2012 as compared to April to June (2011). Most of the respondents of the ASCON survey revealed that the deceleration was mainly due to monetary tightening measures of RBI to control inflation and the effect of global economic slowdown which had a dampening effect on the demand. The situation calls for concerted effort from the Government and the RBI to ensure that we have a cohesive economic recovery plan.”

The survey reveals that out of the 114 sectors surveyed comprising more than 35000 companies, for the period April to June 2012, 7.2% of the sectors are expected to to register excellent growth of more than 20 percent as compared to 20.7% in the corresponding period of previous year.

Estimated Growth trend of the Industrial sectors during Q1 2012

The percentage of sectors with high growth (10 to 20%) has decreased to 24.5% in Q1 2012 from 31.8% in Q1 2011. The share of sectors with low growth (0 to 10%) has moved up to 52.6% as compared to 42.2% in Q1 2011. Similarly the sectors estimated to fall in negative territory has increased from 5.2% in Q1 2011 to 15.7% in Q1 2012.

The sector wise analysis on performance of industry sector clearly indicated that all most all sectors on an average expect decelerating production growth during the first quarter of 2012-13. While there are fewer sectors in the excellent and high category for all segments most of the sectors’ output growth are concentrated in low category.

Some of the sectors estimated to register excellent growth rates (<20%) are LCD/LED, Microwave ovens, DAP, Motors. Some of the sectors estimated to register high growth of (10 to 20) % are Auto components, Automobiles, Energy meters, Ball and Roller bearings and Scooters.

Sectors like Cement, Fertilizer, Tractors, Electric motors, Earth moving and construction equipment, Polyester Filament Yarn, Rubber Goods, Personal computer, Bus and Truck Tyre, Polymer, crude oil etc are expected to register low growth of (0-10)%.

While sectors like Textile Machinery, Transformer, Pumps etc are estimated to remain in negative territory in Q1 2012.

The survey revealed that the issues constraining production growth were low investment rate due to high interest rates, depreciating rupee affecting input costs, high inflation affect input costs and demand, deteriorating global economic conditions affecting export markets and lack of availability of credit and decline in credit flow to industry. Besides, these, the survey also revealed other issues like infrastructure bottlenecks, land acquisition issues, environmental and procedural delays, lack of skilled manpower (technical skills and R&D), affecting the competitiveness and growth of Indian industry.