16.8.13

Factory growth shrinks 2.2% in June





There was grim news on the industrial output front but exports, which rose at their fastest pace in almost two years, provided some relief. However, high stubborn retail inflation sustained the pressure as policymakers battle a sharp slowdown.
Dismal industrial output growth numbers raised apprehension that the first quarter economic growth may fall short of the 5% mark, piling more pressure on the government to reverse the trend. The Indian economy slowed to a decade low of 5% in 2012-13 and the sustained slowdown has raised fears that growth may falter in the current fiscal as well.
 Data released by the Central Statistics Office (CSO) showed industrial output fell for the second consecutive month in June, declining by 2.2%. What made matters worse was the fact that industrial production had contracted 2% in June 2012 as well. Even the May 2013 data was revised downwards to a decline of 2.9% from the previous fall of 1.6%, highlighting the stress in the sector.
Indian Inc said the factory data was a concern and stepped up calls for easing tight monetary policy to boost growth. But there was some cheer for the government as exports staged a smart rebound in July, rising by 11.6% to $25.8 billion, while imports declined 6.2% to $38.1 billion. Gold and silver imports, slowed to $2.9 billion in July from $4.4 billion in the same period last year, and helped keep the trade deficit at the previous month’s level.
Commerce secretary S R Rao said the steps announced by the government to boost exports should help in the months ahead.
Indian exports have remained sluggish due to the slowdown in vital markets, while imports had surged led to a widening of the trade deficit and creating pressure on rupee. But the pressure on the prices front, particularly food inflation remained and highlighted the need to raise supplies. While retail inflation eased marginally in July, it still hovered near the double-digit mark at 9.64% compared to 9.87% for the previous month. The corresponding provisional inflation rates for rural and urban areas for July 2013 are 9.14% and 10.26%, while the final Inflation rates for rural and urban areas for June 2013 were 9.63% and 10.13% respectively.
On the industrial output front, the manufacturing sector continued to be in doldrums, posting a decline of 2.2% compared to a fall of 3.2% in the year earlier period. The mining sector, which has been hit by regulatory delays, fell 4.1% in June compared with a decline of 1.1% in June 2012, while growth in the electricity sector remained stagnant. The capital goods sector, which is a key gauge of industrial activity, fell 6.6% in June compared to a decline of 27.7% in the same month earlier year, while the consumer durables sector fell 10.5% in June 2013 compared with an expansion of 9.1% in June 2012. 

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