Report shows reversal from the earlier trend of slowing growth, with indications of a recovery taking shape in the economy, albeit a slow one.
The CII-ASCON Industry Survey for the April – June 2015-16 quarter reveals a reversal from the earlier trend of slowing economic growth in India, with indications of a recovery taking shape, albeit a slow one.
Commenting on the performance of the sectoral growth trends, Dr Naushad Forbes, Chairman, CII Associations’ Council (ASCON) and President Designate, Confederation of Indian Industry (CII), said that “The recent trend of slow but continuous progress in industrial growth is noteworthy. What is especially significant is that there are fewer sectors anticipating negative growth and there has been a significant and perceptible positive movement in percentage points recorded by many of the sectors which were in moderate and negative growth category a year ago.”
The latest survey, which tracks the growth of the industrial sector through responses collected from sectoral industry associations, reveals a slight improvement in growth trends in terms of production over the corresponding quarter a year ago.
The CII-ASCON Industry Survey which tracks the growth of different industrial and services sectors of the economy, is based on the feedback collected from industry associations affiliated to CII. The industry associations encompass wide range of sectors comprising of small, medium and large enterprises. In most of the cases, these account for approximately 70 percent of the total industry output in the respective sectors.
The survey was conducted from mid-June till end of July 2015 and tracks the estimated growth trends in terms of Production, Sales and Exports for Q1 FY 16.Responses have been segregated in the following four broad categories: (i) ‘Excellent’ (growth in excess of 20 percent ), (ii) ‘High’ (growth in the range of 10-20 percent), (iii) ‘Moderate’ (growth in the range of 0-10 percent) and (iv) ‘Negative’ (growth less than 0 percent).
Of the 93 sectors surveyed, the share of sectors that have recorded excellent growth of more than 20 percent in Q1 (April -June) FY16 quarter has surged up to 16.1 percent (15 out of 93 respondents) as against 7.1 percent (8 out of 112) recorded in the year ago period. This is a clear indication of improvement over the last year.
While the share of sectors witnessing a high growth rate of 10 to 20 percent has reduced significantly to 9.7 percent (7 out of 93) in April-June FY16 from 14.3 percent (16 out of 112) during the corresponding period a year ago, the share of sectors reporting moderate growth has declined marginally to 51.7 percent (47 out of 93) as compared to 51.8 percent in the year ago period. At the same time, the number of sectors recording negative growth has fallen from 26.9 percent (30 out of 112) in the first quarter last year to 23.6 percent (21 out of 93) in the first quarter this year.
On the issues and concerns impacting growth, margin pressure from stiff competition, competition from imports, shortage of power, high regulatory burden, lack of domestic and export demand, shortage of skilled labour and talent and high tax burden have been cited as the most important constraints by more than 50 percent of the respondents.
Industrial relations, transport infrastructure bottlenecks, cost and availability of finance have been quoted as moderately important factors impeding growth.
The survey’s respondents have expressed their optimism in a further improvement in the near-term growth outlook helped by continued policy actions, implementation and enhanced business and consumer confidence. However, a sustainable recovery would be conditional on improvement in domestic demand and investment revival. While monetary easing would be beneficial, weak global demand, limited ability of the corporate sector to support revival in capex on account of over leveraged balance sheets, moderation in rural demand along with stress due to impaired loans on bank balance sheets, will have a bearing on any upside. Respondents have stressed on the need for reviving investments in the economy to boost demand.
The survey has recommended an array of policy measures to boost growth. Some such steps include reduction in interest rates, speedy implementation of infrastructural projects and addressing supply-side constraints on a variety of fronts including infrastructure, energy, agriculture and labour.
Progress on reforms such as the GST Bill and LARR (Amendment) Bill, 2015 will impart greater certainty to investors on the policy front. Further, a proactive role by the Government towards creation of employment opportunities in the non-farm segment of the rural sector through food processing, construction etc. enhancing of capital spending by the states, given that they are now recipients of higher resources from the Centre, would support in the creation of demand. Such a mix of policies, if implemented, would go a long way to revive investor sentiment which in turn would reignite growth in industry and the economy.
“The government should continue to undertake policy reforms aimed at reviving investments, alleviation of implementation bottlenecks and unshackling entrepreneurial activity to further drive growth. This would entail continuing with procedural simplification to facilitate ease of doing business, ensuring transparent, predictable and consistent tax system and working on the pending reform agenda especially of land, labour and environment to help power the ‘Make in India initiative’. The government and industry need to work together to regain the earlier growth momentum,” said Dr Forbes.