Factory output in India slides sharply as exports fall

Discussion in 'Economy & Infrastructure' started by Sailor, May 26, 2009.

  1. Sailor

    Sailor Regular Member

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    Tue May 12, 2009 7:39pm IST

    By Rajkumar Ray

    NEW DELHI (Reuters) - India's industrial output fell at its steepest annual pace in at least 14 years in March, leaving the door open for further interest rate cuts by the Reserve Bank, but analysts said the economy was still set for recovery from late 2009.

    India's factory output in March fell 2.3 percent from a year earlier, the third fall in the past four months and much sharper than market expectations of a 0.5 percent fall.

    It was the steepest fall since annual numbers in the current series became available in April 1995.

    "We were expecting this kind of number given the collapse in external demand and the weak PMI data," said Robert Prior-Wandesforde, Senior Asian Economist at HSBC in Singapore.

    "But we still believe the economy is set for a rebound in the second half of the 2009/10 fiscal year due to fundamental reasons such as fiscal stimulus packages, monetary actions, extra oil and gas output later this year and falling commodity prices and robust domestic demand."

    For a graphic on factory output trends, click here

    Tuesday's dismal data followed figures showing a sharper-than-expected drop in China's exports in April which dampened optimism that a global economic recovery might be around the corner.

    Talk of a recovery in Asia's third-largest economy has picked up as some figures, including car and cement sales, showed some signs of a rebound. But the factory data showed demand was still sluggish, and manufacturing fell an annual 3.3 percent.

    Analysts said a full-blown recovery was only possible after a pick-up in exports, which fell an annual 33.3 percent in March. But that won't happen without a sharp recovery in consumer spending in key markets such as Europe and the United States.

    Still, Indian factory output is primarily geared for domestic demand, unlike many Asian economies which depend heavily on exports, and that is where analysts saw reason to be upbeat.

    "...we are heartened to see consumer durables continue its upward growth trajectory as we feel this will be the driver of economic recovery in a domestic consumption-led economy like India," said Atsi Sheth, chief economist at Reliance Equities.

    Bond yields eased slightly after the data and in afternoon trade the 10-year benchmark bond yield was at 6.34 percent, down three points from before the data.

    MORE RATE CUTS?

    Industrial output, which accounts for a quarter of GDP, grew a paltry 2.4 percent in 2008/09 (April-March), slowing sharply from 8.5 percent growth in 2007/08, Tuesday's data showed.

    The government estimates economic growth slowed to a six-year low of 6.5 percent in 2008/09, after growing at or above 9 percent in the previous three fiscal years. The central bank expects the growth rate to slow further to 6 percent in 2009/10.

    Factory output slowed sharply last year as high borrowing costs and the global credit crunch forced firms first to delay expansion plans, and then cut output as demand for goods in overseas markets fell sharply as the global economy turned down.

    Some analysts said the data could see the central bank cut rates further to boost growth. It has already cut its key lending rate by 425 basis points since October, most recently in April.

    As well, a new government is expected to take office by the end of the month after election votes are counted this weekend, and its priority would be to protect growth and jobs, which should also support activity and demand.

    http://in.reuters.com/article/specialEvents3/idINIndia-39564220090512?sp=true
     
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  3. Su-47

    Su-47 Regular Member

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    Sadly, this is not happening just in India, but all over the world. So we are not alone on this decline. The economic recession has taken a huge bite out of the world economies.

    Lets hope the recession ends soon (around 2010) and the recovery starts. Its part of the economic cycle. We all have to live deal it sometime or the other.
     
  4. Rage

    Rage DFI TEAM Stars and Ambassadors

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    Factory output rise suggests revival

    Unnikrishnaan, UTVi
    Fri, Jun 12, 2009 at 15:40 IST



    NEW DELHI: The recovery is firmly in the works. This was confirmed by the surprise uptick in the industrial output for April which rose 1.4% from a year earlier. The expansion in output has come after two straight months of contraction. The unexpected rise was fuelled by an impressive performance in the manufacturing sector and economists expect growth momentum to strengthen in the coming months.

    Factories across the country are churning out goods at a faster pace than what scene in the past year. At least that is what the figures are suggesting. The industrial output, measure of goods produced at factories, rebounded after contracting for four out of the past five months.

    Data for April showed output expanding 1.4% from a year earlier. The growth has been powered by the manufacturing sector which rose 0.7% from a year earlier in April. The sector accounts for 79% of the industrial output.

    The industrial output data has come on the back of numbers which have reinforced signs that domestic demand is picking up. Car sales rose an annual 2.5% in May, climbing for the fourth month while production of cement, steel and electricity capture by the infrastructure data also expanded at 4.3% in April.

    A stronger recovery could prompt the central bank to halt its drive to lower interest rates. The bond markets reflected this as yields rose after data was released as markets fear a turnaround in the Reserve Bank’s policy. But there are some who feel the euphoria is short-lived and we are far from a sustained recovery.

    The government is betting on an economic recovery this year to give them much needed revenues to bridge the deficit. A stronger industrial output will generate more revenues in the form of tax collected at factory gates called the excise duty. Slower economic growth last year meant a drawdown on government finances and an unmanageable fiscal deficit. Analysts now say the current financial will turn out much better this year provided there are measures to push growth. And that will be known in the budget which will be unveiled in the first week of July.


    http://www.utvi.com/news/latest-business-news-india/24976/factory-output-rise-suggests-revival.html
     

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