Manufacturing sector may return growth of 9.5% in 2008-09
The worst many be over for India's manufacturing sector. The overall manufacturing growth rate is projected to rise to 9.5% in 2008-09, after declining to 8.8% in the 2007-08 from a high of 12.3% attained in the previous year (2006-07).
This prognosis is held out by the FICCI Survey on Manufacturing Industry, which analysed the responses from 25 Basic Goods/Core sectors, 21 Capital Goods sectors, 15 Intermediate Goods, 26 Consumers Durables, and 13 Consumer-Non-Durable sectors.
Of the 100 sectors surveyed, as many as 67 sectors are poised to achieve 'excellent' to 'high' growth rates ranging 10 to 20 per cent or more. While 12 sectors project excellent growth of more then 20 per cent or more, 55 sectors foresee high growth of 10 to 20 per cent, 32 sectors expect moderate growth of up to 10 per cent and 1 sector has projected a negative growth during 2008-09.
The charge has been led by specialty chemicals, earth moving and construction equipment, industrial valves, printing machinery, frost free refrigerators, micro wave ovens and skin care and cosmetics etc.
The FICCI Survey notes that the reasons for such an optimistic projection are increased investment by companies leading to substantial capacity addition, increasing mergers and acquisitions helping industry to reap economies of scale, focus on high-end and superior technology products, higher demand for sophisticated lifestyle products, entry of foreign companies in various industry segments and higher export prospects for many sectors.
FICCI believes that while the present situation may continue for next two three months, the manufacturing industry would be able to revive and achieve higher growth during the terminal period of the financial year 2008-09 provided the government takes some pro-active reform measures to redress the genuine grievances of the manufacturing industry.
While the farm loan waiver scheme and the proposed salary hikes of government employees will help to generate more demand for manufactured items, FICCI is of the view that there is need for stimulating consumption/demand; reducing interest rates; and no further cuts in custom duty on manufactured goods. There is the need for ensuring relief package for exporters; increasing rate of depreciation; reducing corporate tax rate and correcting anomalies due to inverted duty structure existing in the tax structure and arising out of FTAs/RTAs.
In order to make growth of this order sustainable, the FICCI survey also underlines the need for adopting appropriate raw material policies; improving regulatory environment; helping capacity building of SMEs; skill development and improving infrastructure for helping the industry to achieve lower cost, improved quality and better performance and for higher manufacturing growth.
The sectors which are projected to have excellent growth during the financial year 2008-09 are: specialty chemicals (22%), power cables (20%), earth moving and construction equipment (20%), industrial valves (20%), printing machinery (20%), viscose fibre (20%), frost free refrigerators (25%), DVD players (25%), micro wave ovens (25%), skin care and cosmetics (20%), deodorant (25%), and shaving cream (22%).