Decline in manufacturing of cotton textiles

May 13, 2008 - India

The release of IIP numbers corroborate the concerns raised earlier by CII Manufacturing Council with respect to the growth rates of manufacturing.

According to IIP figures release the growth for the manufacturing has decline to 8.3% from 12.5% over the same period last year. Similarly electricity has dropped to 6.4% from 7.2% with overall decline to 8.1% from the previous year 11.6%.

The IIP data released reflects a drop in the growth across the sectors. The month of March in particular reflects a new low for manufacturing sector clocking growth of just 2.9%.

The various sectors contributed to this decline of manufacturing are cotton textiles, other textile products, wood and wood products, furniture and fixtures, basic chemicals and chemical products, non metallic products and transport equipment and parts.

This downtrend was reflected in the latest CII ASCON Survey released by CII’s Manufacturing council last week.

The downtrend in the growth performance prevailed over the last year due to various much talked about reasons like high inflation, rupee appreciation and high interest rates.

Manufacturing sector was hit due to increase in raw material prices, increase in wage bill due to high competition and well known bottleneck with respect to infrastructure.

Manufacturing suffered a double whammy as it also suffered on account of low consumer spending as hike in interest rates made consumers defer their purchase and thus affecting the industrial output.

The Manufacturing sector has absorbed the affect of all these issues and managed to clock the growth of 8.6% over the period from April to March 2008 and the mood is very positive about clocking a double digit growth by the end of the year.

There is an urgent need to address the various concerns and issues for have sustainable manufacturing growth. There is urgent need to build infrastructure, create institutions and policy for Advanced Manufacturing and Engineering, remove bottlenecks with respect to power costs and labour laws. The moderation of interest rates would be also detrimental for achieving the targeted growth.

CII Manufacturing council has also suggested 10-point strategic agenda for taking manufacturing to new growth plane.

Capital goods could get much needed boost by implementation of recommendation made to Prime Minister by A M Naiks Task force on Capital goods. Announcement of a National Manufacturing Policy will help manufacturing consolidate in long term.