Economic Recovery on Track : CII ASCON Survey

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The CII ASCON survey results for the quarter, January – March FY16, reveals an improvement in growth trends in terms of production in the Q4 FY16 quarter over the corresponding quarter a year ago. The current trends also point towards a bottoming out of growth trends in the majority of sectors.

Commenting on the performance of the sectoral growth trends, Ms Shobana Kamineni, President Designate & Chairperson, Associations’ Council, Confederation of Indian Industry (CII), said that “While the pace of economic activity remains uneven across sectors, participation of more and more sectors in the uptick is pointing to a strong revival in the economy with sentiments far more inspiring than before. We are hopeful that going forward, given the government’s continued focus on reviving demand, the current uptick in growth momentum is likely to be supportive of a robust recovery in the coming quarters.”

The Survey, which tracks the growth of economic sectors on a quarterly basis, based on feedback received from sectoral industry associations, shows that while a majority of the sectors are still continuing to witness ‘moderate’ growth rates of ( 0 to 10 percent) with ‘excellent’ (>20 %) and ‘high’ (10-20 percent) growth limited only to few sectors, there has been a sharp decline in the share of sectors registering ‘low’ growth of (<0 percent).

According to the Survey, out of the 102 sectors surveyed, the share of sectors registering ‘Excellent’ growth of >20% has remained constant at 9.8 percent (10 out of 102) witnessed in the same quarter a year ago period. However, the share of sectors witnessing ‘high’ growth of 10 to 20 percent has surged substantially to 20.6 percent (21 out of 102) as against 10.8 percent (11 out of 102) recorded in the same quarter previous year.

At the same time, the share of sectors witnessing ‘moderate’ growth of 10 to 20 percent has witnessed a marginal decline to 45.1 percent (46 out of 102) in the January -March FY16 from 49.0 percent (50 out of 102) during the corresponding period a year ago. The number of sectors recording ‘Low’ growth has declined significantly to 24.5 percent (25 out of 102) in Q4  FY16 from  30.4 percent (31 out of 102) in the same quarter previous year.

A further analysis of the sectors at the aggregate level (with industry being classified into broad segments in terms of performance of production viz excellent and high (above 10 percent) on one hand and moderate or negative (below 10 percent) on the other) reaffirms our perception that there are improvements on the ground. This is evident from the fact that the number of sectors showing excellent and high growth have shown some improvement in the Q4FY16 with around 75.3 percent of sectors recording positive growth in Q4FY16 as compared to 69.8 percent in Q4FY15.

An analysis of growth trends on a sequential quarter-on-quarter basis also presents improvements in the growth trends in Q4FY16 as compared to the Q3FY16. According to the Survey, while there has been a marginal increase in the percentage of sectors reporting ‘excellent’ growth, there has been a substantial surge in the share of sectors reporting ‘high‘ growth.  The share of sectors reporting high growth has increased to 20.6 percent  (21 out of 102) share in Q4FY16 from 6 percent (6 out of 100) in the previous quarter.

On the other hand, while the share of sectors recording ‘Moderate’ growth has dropped to 45.1 percent (46 out of 102 sectors) as compared to 53.0 percent (53 out of 100 sectors) in Q3FY16. The number of sectors recording ‘Low’ growth has declined significantly with 24.5 percent (25 out of 102 sectors) in Q4FY16 as against 33 percent (28 out of 100 sectors) in Q3FY16. The movement of sectors from lower to higher growth rates clearly points towards an improvement in the growth trends.

On capacity utilization, an indicator of demand acceleration in the economy, the Survey reveals improvements in the January–March quarter. According to the Survey, around 53.3 percent of the respondents have reported capacity utilizations in the range of 50 to 75 percent for January – March FY16 quarter registering a slight improvement from the last quarter. 30.8 percent of the respondents have reported it to be in the range of 75-100% when compared to 21.4 percent recorded in the last quarter. The trend is expected to continue in the coming quarters as well.
With respect to issues and concerns impacting growth, lack of domestic demand (58.8%), high tax burden (50.0%), cost and availability of finance (41.7%), competition from imports (40.0%) have been cited as the most important constraints by more than 40 percent of the respondents.

The Survey respondents have emphasized the need for intensive action on reforms related to trade and the business environment and have stressed on improving the ‘Ease of Doing Business’ indicators with a focus on removing the massive transaction costs by enabling efficient processes and a conducive taxation system to help integrate India into global supply chains. These measures, coupled with sustaining the reforms agenda, particularly ensuring quicker progress on reforms such as the GST Bill and LARR (Amendment) Bill, 2015, will impart greater certainty to investors on the policy front.