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Economy on a growth path, Continued normalization of growth conditions witnessed: CII ASCON SURVEY (Q1 FY19)
Aug 13, 2018

CII ASCON Industry Survey which tracks the sectoral growth trends through the responses collected from sectoral industry associations reveals moderate improvements in growth trends in terms of production in April -June FY19 over the corresponding quarter a year ago.

The Survey classifies the growth trends across four broad categories, namely excellent (>20%), High (10-20%), Moderate (0-10%) and Low (<0%).

Commenting on the performance of the sectoral growth trends, Mr Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII), said that “The ASCON Q1 FY19 Survey results reflect steady progress in economic growth. What is especially significant is that there has been a perceptible increase in the share of sectors recording higher growth. Further, fewer sectors are anticipating negative growth trends. This clearly points towards improvement in the economic environment. Further, an increase in capacity utilization is clearly apparent.”

Out of the sectoral responses received for 70 sectors, the Survey analysis reveals a sharp increase in the sectors witnessing ‘Excellent’ growth (>20%) in April-June (Q1) FY19, as compared to the same quarter a year ago. The share of sectors witnessing ‘Excellent’ growth has improved to 14.3 percent (10 out of 70 sectors) in Q1 FY19 from 5.7 percent (4 out of 70) in Q1 FY18. At the same time, the share of sectors recording ‘High’ growth and ‘Moderate’ growth has improved marginally while the share of sectors witnessing ‘Low’ growth (<0%) has come down substantially.

The share of sectors registering ‘High’ growth has inched up to 21.4 percent in Q1 FY19 (15 out of 70) from 20 percent (14 out of 70) in Q1 FY18 whereas the share of sectors witnessing ‘Moderate’ (0-10%) growth has improved somewhat to 44.3 percent (31 out of 70) in the Q1 FY19 from 42.9 percent (30 out of 70) in same period a year ago. The share of sectors witnessing ‘Low’ growth (<0%) has come down substantially to 20 percent (14 out of 70) as compared to 31.4 percent (22 out of 70) recorded in the same period previous year.

While the growth trends remain concentrated in the ‘Moderate’ category, a deceleration in the pace of de-growth suggests firming of the recovery in the economy.

On the production front, some of the sectors which have registered excellent growth include Commercial Vehicles (67.7%), Three Wheelers (61.0%), Construction Equipment Machinery (30.9%), NP/NPK Fertilizer (24.5%), Soya Oil (22.7%), Tractors (20.1%), Sugar (223%). On exports front, 3 wheelers (75%), tractors (28.6%), commercial vehicles (41%), 2 wheelers (30%), sugar (291 %), rapeseed meal (89.6%) have reported excellent growth.

In line with the improvements in the sectoral growth trends, capacity utilization has also shown improvement in the surveyed quarter as compared to the previous quarter. According to the Survey, 59.1 percent of the respondents have reported capacity utilization in the range of 65-80 percent in the surveyed quarter whereas 13.6 percent of respondents have reported capacity utilization to be above 80 percent. Signaling further improvements in sectoral capacity utilization in the coming quarter, 63.6 percent of the respondents expect capacity utilization to be in the range of 65-80 percent whereas 18.2 percent respondents expect it to be above 80 percent in Q2 FY 19.

With respect to issues and concerns impacting growth, ‘Competition from Imports’ (50.0%), ‘Regulatory Burden’ (42.9 %) and ‘Lack of required infrastructure’ (41.7%) have been reported as the top three most important issues for the industry.

Exuding optimism on the near-term growth outlook, 63.6 percent of the respondents expect the business situation in their respective sector to improve moderately whereas 31 percent expect the situation to remain same in the next six months. 

Overall, going forward the results point towards moderate improvements in growth trends supported by recovery in domestic demand and investment cycle in the coming quarters supported by consumption both in rural and urban fronts aided by favorable monsoons and moderation in inflation and the onset of festive season.

The current expectations on the investment outlook for the next two months also points towards an impending recovery in investment cycle supported by improving capacity utilization levels amidst domestic demand recovery. Further, a continuous push to structural reforms such as GST, PSU bank recapitalization and time-bound insolvency resolution would also support the recovery.

To further push the pace of recovery in economic and sectoral growth, the respondents to the CII ASCON Industry Survey have suggested various short to long term measures such as stable business environment; developing alternate long-term funding options for infrastructure such as corporate bond market, municipal bond market, strengthening enforcement of IPR; providing level playing field with imports; building international market access and reducing cost of doing business among others.

New Delhi

August 11, 2018 

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