Double Whammy: Factory Output, Exports Hit - The New Indian Express

Double Whammy: Factory Output, Exports Hit

Published: 12th April 2014 06:00 AM

Last Updated: 12th April 2014 01:48 AM

Showing slowdown in the economic activities, manufacturing sector, especially capital goods pulled down the Index of Industrial Production (IIP) as it slipped into the negative territory and contracted 1.9 per cent in February.  Coupled with this, a worse than expected trade data hit the market sentiment.  Exports from India in March declined 3.15 per cent to $29.57 billion and fell short of the total export target of $ 325 billion by $ 13 billion. The Bombay Stock Exchange benchmark Sensex lost over 86 points on Friday.

Industrial production had shown some signs of recovery in January but the effect was negated by the poor show of several sectors.

Industrial output for January was revised upward to growth of 0.8 per cent from a provisional estimate of 0.1 per cent, according to data released by the Central Statistics Office (CSO). In February 2013, the IIP recorded modest growth of 0.6 per cent.

Factory output started to decline in October, when the IIP contracted 1.2 per cent, and continued till December, as per CSO data released Friday.

Factory output as measured by the Index of Industrial Production (IIP) showed a decline of 0.1 per cent during the 11-month period from April to February, compared with growth of 0.9 per cent in the corresponding period a year earlier.

Manufacturing, which constitutes over 75 per cent of the index, declined 3.7 per cent in February as against growth of 2.1 per cent in the same month a year ago.

During April-February, the sector's output contracted 0.7 per cent compared with 1 per cent growth previously.

Overall, 13 of the 22 industry groups in manufacturing showed negative growth in February as compared to the corresponding month of 2012, government data revealed.

Commenting on the IIP numbers Chandrajit Banerjee, Director General, CII, said, “The return of industrial production to the negative territory is extremely disappointing and is much below the expected industrial potential. It is also disconcerting to note the negative growth of the manufacturing sector for the fifth consecutive month, indicate a downturn in the business cycle as weak consumption and investment demand continue to stymie growth impulses.”

Trade gap narrows

Meanwhile, despite a hit in export, the country’s trade deficit improved marginally as demand for gold imports remained subdued in the same month.

However, India’s exports grew 3.98 per cent to $ 312.35 billion in 2013-14, while imports dipped 8.11 per cent to $450.94 billion, narrowing the trade deficit to $ 138.59 billion, data from the Ministry of Commerce and Industry said Friday.

A drop in gold and silver imports helped to shrink the trade gap. Overseas purchases of the precious metals dropped 40 per cent to $33.46 billion.

Exporters said, both domestic and global factors affected outbound shipments.

“Manufacturing is declining. About Rs 20,000 crore is held up with the revenue department as they are not clearing our refunds. It has impacted exports adversely. Global demand situation is also not very healthy,” Federation of Indian Export Organisations (FIEO) President Rafeeq Ahmed said.

According to the data the trade deficit in 2012-13 stood at $190.33 billion. The trade deficit last month was at $10.5  billion compared with $10.4 billion in March 2013.

The country’s merchandise exports in 2013-14 fell short of the target of $ 325 billion set by the government and were higher than $ 300.4 billion in 2012-13.

While oil imports in March increased 17.7 per cent to $ 15.78 billion. In 2013-14, oil imports grew 2.2 per cent to $ 167.62 billion.

Sectors that contribute significantly to the country’s exports recorded lower growth in 2013-14.

Gems and jewellery exports declined 8.82 per cent to $ 39.52 billion. Petroleum exports, which account for about 20 per cent of India’s outward shipments, dipped 0.01 per cent to $ 60.85 billion in 2013-14.

Exports of electronic goods fell 5.87 per cent to $ 7.58 billion. However, pharma and engineering exports registered growth of 1.2 per cent and 8.49 per cent, respectively, to $ 14.84 billion and $ 61.61 billion.

Ready-made garment shipments registered a growth of 15.58 per cent to $14.94 billion.

(With agency inputs)

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