Key industry sectors still in trouble: ASSOCHAM study

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Key industry sectors still in trouble: ASSOCHAM study
Green shoots in the Indian economy are visible, at best in patches and cannot be seen as well-spread unless pick-up in investment cycle is evident, an ASSOCHAM study has pointed out.

The spread-sheet analysis of the industrial data suggests that near two dozen industry segments have reported negative trend in production in the first half of the current financial year and unless a reversal is seen in demand, the investment cycle is difficult to revive, said Mr. D S Rawat, Secretary General ASSOCHAM.

"Unless we see clear signs of revival in the capital goods sector, the investment in manufacturing cannot be visible. The sector which reflects the state of investment in the key manufacturing industries continues to suffer- an indication of lack of appetite among the industry in the face of demand slowdown," the study - ‘Where Are the Green Shoots' noted.

For the April-September period of the FY 2013-14, the capital goods sector showed a de-growth of 0.7 percent. What is worse - the segment reported a huge 6.8 per cent negative growth in September. It is true that the situation was extremely bad in the first half of FY 2012-13 and in September ,2012 when the capital goods had posted a de-growth of 14.2 per cent and 13.3 per cent respectively.

"We have seen production in capital goods slip in first half of 2013-14 further from the low base of the same period in the previous year- the continuation of de-growth over de-growth is a great cause of concern," the paper noted.

The consecutive negative trend - both in the first half of this year and in the previous fiscal also shows that there is a big surplus capacity lying in the sector and it would be quite a while before fresh investment can be expected since even if a positive territory is found, it has to first absorb the surplus capacity with the industry before a demand-driven investment is expected, said Mr. Rawat.

Leave alone green shoots, some of the industries like hot rolled steel and sugar machinery are in a bad shape so much so that they produced over 58 per cent and 39 per cent less in September, 2013 than the same month last year. Somewhat similar is a situation with regard to colour TV sets which sold over 30 per cent less than last year and commercial vehicles, down 28.5 per cent.
Even the mobile telephone story appears to have lost the ring-tune. Their production along with accessories was down 26.6 per cent in September this year.

"What is causing concern is that several employment generating industries like furniture making have shown a rapid drop (minus 14 percent) along with fabricated metal products," the ASSOCHAM study noted. While some industries like apparel have shown smart recovery, the decline in others is so sharp that the overall sentiment in the business circles, particularly in the labour-oriented small scale, remains subdued.

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