Outlook stays sluggish

Hit by fall in profit margins, investment growth

Next financial year, industrial growth is likely to improve, owing to the improving business sentiment and the economic recovery in developed countries. This financial year, it is estimated to slow to 3.1 per cent, against 3.5 per cent in 2011-12, according to Economic Survey 2012-13. The Survey said because of the downward momentum, industrial growth was likely to remain sluggish in the coming months.

This year, industrial growth fell because of slow investment growth, declining profit margins, a decline in credit flow growth and the sluggish global economic recovery. The decline in natural gas and crude oil output also aided the fall in industrial growth.

In 2012-13, growth in the manufacturing sector is estimated to decline to 1.9 per cent. Manufacturing growth in 2011-12 was 2.7 per cent; in 2010-11, it was 9.7 per cent. The mining sector is expected to grow 0.4 per cent; in 2011-12, it contracted 0.6 per cent. In 2012-13, the electricity sector is estimated to expand 4.9 per cent, while the consumer durables segment is expected to grow 16.9 per cent.

Gross capital formation recorded average growth of 13.2 per cent between 2004-05 and 2011-12. The performance of companies took a hit because of the declining industrial growth.

Though industrial production recovered to 8.3 per cent growth in October 2012, it fell 0.8 per cent in November and 0.6 per cent in December.