Stagnation in IIP reflects subdued investment & consumption demand: RBI
Updated: May 01, 2014 01:49:18pm
New Delhi, May 1 (KNN) Output of basic metals, fabricated metal products, machinery and equipment, motor vehicles, food products, gems and jewellery and communication equipment recorded a decline in the wake of ‘stagnation’ in the Index of Industrial Production (IIP) over two years, according to RBI’s Quarterly Industrial Outlook Survey from April-June 2014.
“The Index of Industrial Production (IIP) showed no increase during April-January 2013-14, compared with 1.0 per cent growth in the corresponding period of the previous year. This stagnation in growth over two years reflects subdued investment and consumption demand,” RBI said on the Macroeconomic and Monetary Developments 2014-15. .
“This has resulted in contraction in production of capital goods and consumer durables in the current year. Output of basic metals, fabricated metal products, machinery and equipment, motor vehicles, food products, gems and jewellery and communication equipment recorded a decline,” the country’s apex bank added.
Growth of core industries, which provide key inputs to the industrial sector, remained sluggish at 2.4 per cent during April-January 2013-14 compared to a growth of 6.9 per in the corresponding period a year ago.
“This sluggishness, in part, reflects contraction in natural gas and crude oil production and slow growth in all other infrastructure industries, except electricity,” RBI said.
The developments in lead indicators of the services sector activity signal improvement in most segments except cement production and in commercial vehicle sales.
As per the labour bureau survey, employment generation in eight key sectors that was moderating since January 2012 showed some improvement in July-September 2013 vis-a-vis the previous quarter.
“Some of the private data sources of employment in the organised sector have also registered uptick in hiring since Q2 of 2013-14. The IT-BPO sector contributed to this improvement along with other sectors such as textiles, telecom, pharmaceuticals as well as travel/tourism,” RBI said.
With a gradual recovery in key partner economies, India’s exports began to improve in July 2013; this was also helped by a depreciation of the rupee. However, export growth momentum recorded during July- October could not sustain thereafter. Export growth began to decelerate in November 2013 and eventually turned negative in February 2014. Slowdown in exports in recent months can be attributed to certain sector specific issues and global factors.
“For instance, 7.1 per cent decline in exports of gems and jewellery during 2013-14 (April-February) could be largely reflective of the price effect (estimated at (-) 4.2 per cent) mainly emanating from a 20.1 per cent y-o-y drop in gold prices,” said RBI.
Deployment of credit to industries moderated in 2013-14, even as credit to agriculture and allied activities, services and personal loans picked up. Within industries, sectors such as food processing, construction, leather, rubber, glass and paper witnessed a pick-up during April-February 2014.
Manufacturing PMI, for the month of February 2014, touched a year’s high on the back of higher output and new orders.
“The rural demand base is likely to shore up demand following record agricultural output. In addition, external demand is expected to improve further during 2014-15 stemming from encouraging prospects for global growth, notwithstanding some recent loss in export growth momentum,” said RBI.
The Reserve Bank of India had launched the 66th round of IOS for reference period April-June 2014. The survey gives an insight into the perception of the public and private limited companies engaged in manufacturing activities about their own performance and prospects. The survey covers non-financial private and public limited companies with a good size/industry representation. (KNN/SD)
“The Index of Industrial Production (IIP) showed no increase during April-January 2013-14, compared with 1.0 per cent growth in the corresponding period of the previous year. This stagnation in growth over two years reflects subdued investment and consumption demand,” RBI said on the Macroeconomic and Monetary Developments 2014-15. .
“This has resulted in contraction in production of capital goods and consumer durables in the current year. Output of basic metals, fabricated metal products, machinery and equipment, motor vehicles, food products, gems and jewellery and communication equipment recorded a decline,” the country’s apex bank added.
Growth of core industries, which provide key inputs to the industrial sector, remained sluggish at 2.4 per cent during April-January 2013-14 compared to a growth of 6.9 per in the corresponding period a year ago.
“This sluggishness, in part, reflects contraction in natural gas and crude oil production and slow growth in all other infrastructure industries, except electricity,” RBI said.
The developments in lead indicators of the services sector activity signal improvement in most segments except cement production and in commercial vehicle sales.
As per the labour bureau survey, employment generation in eight key sectors that was moderating since January 2012 showed some improvement in July-September 2013 vis-a-vis the previous quarter.
“Some of the private data sources of employment in the organised sector have also registered uptick in hiring since Q2 of 2013-14. The IT-BPO sector contributed to this improvement along with other sectors such as textiles, telecom, pharmaceuticals as well as travel/tourism,” RBI said.
With a gradual recovery in key partner economies, India’s exports began to improve in July 2013; this was also helped by a depreciation of the rupee. However, export growth momentum recorded during July- October could not sustain thereafter. Export growth began to decelerate in November 2013 and eventually turned negative in February 2014. Slowdown in exports in recent months can be attributed to certain sector specific issues and global factors.
“For instance, 7.1 per cent decline in exports of gems and jewellery during 2013-14 (April-February) could be largely reflective of the price effect (estimated at (-) 4.2 per cent) mainly emanating from a 20.1 per cent y-o-y drop in gold prices,” said RBI.
Deployment of credit to industries moderated in 2013-14, even as credit to agriculture and allied activities, services and personal loans picked up. Within industries, sectors such as food processing, construction, leather, rubber, glass and paper witnessed a pick-up during April-February 2014.
Manufacturing PMI, for the month of February 2014, touched a year’s high on the back of higher output and new orders.
“The rural demand base is likely to shore up demand following record agricultural output. In addition, external demand is expected to improve further during 2014-15 stemming from encouraging prospects for global growth, notwithstanding some recent loss in export growth momentum,” said RBI.
The Reserve Bank of India had launched the 66th round of IOS for reference period April-June 2014. The survey gives an insight into the perception of the public and private limited companies engaged in manufacturing activities about their own performance and prospects. The survey covers non-financial private and public limited companies with a good size/industry representation. (KNN/SD)
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