As industrial production contracted for the first quarter of this financial year, a survey by CII-Ascon presented a further gloomy picture for factory output in the second quarter of 2012-13. It blamed the high interest regime, the deficient monsoon and inflation, among other factors, for the apprehension over slackening industrial performance in July-September 2012-13.
The survey showed of the 103 sectors covered, those expecting more than 20 per cent rise in production (excellent growth) in the second quarter this year, declined sharply to 3.8 per cent, against 23.8 per cent in the corresponding period of 2011-12. As many as 8.4 per cent of those surveyed had expected excellent growth in the first quarter this financial year, against 20.7 per cent in Q1 of 2011-12.
Similarly, the sectors expecting low growth (0-10 per cent in production) in the July-September period of 2012-13 expanded to 51.4 per cent from 44.7 per cent in the corresponding period of last fiscal. Those expecting low growth stood at 51 per cent in the first quarter, against 42.2 per cent in April-June 2011-12.
The sectors expecting negative growth rose to 15.6 per cent in the second quarter this year from 10.6 per cent in the corresponding period last year. In the first quarter of this fiscal, 25 per cent of the sectors surveyed had expected to see decline in production growth against 5.2 per cent in the first three months of last fiscal. The sectors expecting low or negative growth outlook include capital goods sectors like earth moving & construction equipment, electric motors, transmission line towers, multi-purpose vehicles (Vans), transformers, textile machinery, distribution transformers, hydro electricity, and tractors, which will have a great bearing on the growth of related sectors, ranging from agriculture, real estate to electricity, the survey said.
Capital goods production declined over 27 per cent in June and more than 19 per cent in the first quarter of this fiscal, according to official data.
Consumer goods sectors like sunflower oil, mustard oil, soya oil, air conditioners, TV, passenger cars are also expected to record low or negative growth performance during the current quarter, indicating weakening consumer demand too.
On Saturday, Finance Minister P Chidambaram had asked banks to cut equated-monthly instalments (EMIs) on consumer durable goods to kick-start investment for perking up larger economic growth.
CII’s director general, Chandrajit Banerjee, called for immediate policy actions from both, the Government and RBI to arrest further decline in industrial output.
“The urgency that is required to announce confidence building measures at once, along with reduction in policy rates by RBI cannot be over-emphasised”, said Banerjee. RBI kept the rates unchanged in the policy meet in July, with repo rate at 8 per cent and reverse repo at 7 per cent. CRR was left unchanged at 4.75 per cent.
Majority of sectors surveyed favoured reduction in interest rates, quick implementation of Goods and Services Tax, fast tracking of large pending projects, re-consideration of the retrospective amendments and GAAR and emphasized on unshackling the supply bottlenecks that plagues several sectors of the economy.