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58 sectors record production growth decline

BS Corporate Bureau

It has been a dismal first quarter for the Indian industry. As many as 58 of the 85 sectors of industry for which data has been collected by the Confederation of Indian Industry showed deceleration in production growth in April-June 2001 over the same period of the previous year. Worse, 25 sectors have shown negative growth in the first quarter over last year.

But there is a silver lining to the dismal picture. Nearly 37 sectors have projected their growth in the next six months would be higher than that in the first quarter. And almost half the sectors (41) expect growth in the next six months to be higher than what was achieved in the 14 months of April 2000-May 2001, over the same period of the previous year.

The sectors which have shown deceleration in the first quarter cut across all areas of industry and include aluminium, cement, auto components, cars, tobacco, steel, fertilisers amongst others. Areas which have shown higher growth this quarter than the previous one include construction, cold roll steel strips, food processing, housing finance, malted foods amongst others.

The sectors, which have shown negative growth include aluminium extrusions, nylon filament yarn, electrical cable and wires, textile machinery, power cable, light commercial vehicles and colour television sets amongst others.

The data, based on the Ascon Industry Monitor report released by CII, represents approximately 65 per cent of the total industry output.

However there are some sectors which expect demand and production to pick up. In consumer electronics, colour television production where growth was negative at -10 per cent in the first quarter is expected to grow by 5 per cent in the next six months.

Sales of refrigerators which grew by a mere 0.5 per cent in the first quarter and that of washing machines which showed negative growth of 5 per cent are expected to grow by 5-10 per cent in the next six months -- clear signs that the worst may be over for this industry.

The auto industry might see some relief with overall sales, which were a negative 1 per cent in the first quarter, turning positive in the next six months and growing by around 5 per cent. Riding on the recovery, the auto component sector has projected a growth in sales of 3-5 per cent, compared to a negative growth of 1 per cent in the first quarter.

But on the other side of the coin, overall production in the auto sector is projected to decelerate even further in the next six months to less than 5 per cent, compared to a 6 per cent growth in the first quarter. This clearly means that auto companies have created large inventories, which they are now planning to clear before they push production.

Anticipation of good rains have also helped the fertiliser industry to project a growth in sales ranging from 5-10 per cent in the next six months, compared to a sales growth of only 0.5 per cent in the first quarter.

Demand for steel as a result of the revival in construction is also projected to grow between 5-10 per cent in the next six months, compared to a growth of only 5 per cent in the first quarter. There is good news for the aluminium industry also which expects sales to go up by 5 per cent in the next six months, compared to a decline of 7.5 per cent in the first quarter.

Yet another key indicator of the health of the economy--demand for power-- is also projected to show a recovery in demand. Sale of thermal power is expected to grow by 5-10 per cent in the next six months over a growth of only 4 per cent in the first quarter. More dramatically, hydro-electric power sales will grow up to 5 per cent in the next six months compared to a negative growth of 12.6 per cent in the first quarter.

Of course, there are some areas of serious concern. The machine tool industry expects negative growth of 5 per cent in the next six months, compared to a minimal growth 2 per cent in the first quarter because of sluggish order inflow and easy availability of second hand machines at cheaper prices. Even the earthmoving, construction and mining equipment sector expects sales to decelerate further in the next six months. All this is a clear indication that Indian industry is not making fresh investments in either expansion of their capacities or on new projects.

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