August 19th, 2012 - The CII ASCON survey, which tracks the growth of industrial sector of the economy through survey feedback received from sectoral industry associations and individual industry members, reveals deepening of the industrial slowdown in the wake of continuing issues related to high interest rate, deficient monsoon, inflation, widening fiscal and current account deficits and slowing global economy.

The survey, comparing the expected growth of 103 industrial sectors of the economy for July-September 2012 over July-September 2011, categorises the growth ranges in four broad categories namely excellent (>20%), good (10-20%), low (0-10%), and negative. The proportion of companies expecting excellent performance is reported to have shrunk considerably (from 23.8% to 3.8%) and number of sectors that are expecting low growth (from 44.7% to 51.4%) and negative growth (from 10.6% to 15.5%) have expanded significantly for July-Sep quarter of current year compared to the same period of last year.

The low growth outlook for the current quarter comes on the heels of a dismal growth performance recorded by industrial sector during the previous quarter (April-June) on year-on-year basis. According to CII ASCON survey, the share of sectors reporting excellent and good performance during April-June, 2012 over the corresponding period of last year contracted heavily from 20.7 percent to 8.4 percent and from 31.8 percent to 14.1 percent, respectively. Accentuating the problem, there was a sharp increase in share of sectors reporting low growth (from 42.2% to 51%) and negative growth (from 5.2% to 25%).

Expressing concern over the continuous deterioration in the performance of the industrial sector, Mr Chandrajit Banerjee, Director General CII, said that "immediate policy actions are needed both by the Government and RBI to arrest further decline in industrial output. The urgency that is required to announce confidence building measures at once, along with reduction in policy rates by RBI is cannot be overemphasised. Further, to avoid a downward spiral in industrial output, fiscal measures, such as acceleration of deprecation rate, etc., to promote fresh investments must be announced. There is also the imperative of getting projects moving on the ground, which would lift sentiments and boost investments. This does not entail major political decision or negative impact on revenues of the government.

The sectors reported to be expecting low / negative growth performance during the current quarter encompass all segments of industry, with far reaching implications on the economy in terms of employment and livelihoods," added Mr Banerjee.

The sectors expecting low/negative growth outlook include capital goods sectors like Earth Moving & Construction Equipment, Electric Motors, Transmission Line Towers, Multi-purpose Vehicles (Vans), Transformers, Textile Machinery, Distribution Transformers, Hydro Electricity, and Tractors, which will have great bearing on the growth of related sectors, ranging from agriculture, real estate to electricity.

Consumer goods sectors like Sunflower Oil, Mustard oil, Soya, Air Conditioners, TV, Passenger Cars, etc., are expected to record low/negative growth performance during the current quarter, indicating weakening of consumer demand too.

To reverse the deteriorating business sentiments, the survey revealed numerous policy actions, both in the fiscal and monetary policy domain. Majority of them favoured reduction in interest rates, quick implementation of GST, fast tracking of large pending projects, re-consideration of the retrospective amendments and GAAR. They emphasized on unshackling the supply bottlenecks that plagues several sectors of the economy.