€¦ · Economy Overview 4 2. CII ASCON Industry Survey Results 7 2.1 Methodology 2.2 Industrial growth performance: January -March; FY17 over FY16 2.3 Comparison of growth performance

June 2017

Executive Summary 1

1. Economy Overview 4

2. CII ASCON Industry Survey Results 7

2.1 Methodology

2.2 Industrial growth performance: January -March; FY17 over FY16

2.3 Comparison of growth performance during January -March FY17 Over October- December FY17

2.4 Outlook for next six months

3. Industry Suggestions 13

4. Appendices 15

Appendix A: Sample Coverage and Methodology

TableA1: SampleCoverage:Use-basedclassificationofsectors

Appendix B: Distribution of total sample sectors over different growth ranges

TableB1: Production January -March;FY17overFY16

TableB2: Sales January -March;FY17overFY16

TableB3: Exports January -March;FY17overFY16

Contents

Copyright©2017byConfederationof Indian Industry (CII),All rights reserved. Nopart of thispublicationmaybe reproduced, stored in, or introduced intoa retrieval system,or transmitted in any formorbyanymeans (electronic,mechanical, photocopying, recordingorotherwise),without thepriorwrittenpermissionof thecopyrightowner.CII hasmadeeveryeffortto ensure theaccuracyof informationpresented in thisdocument.However, neitherCII nor anyofits officebearersor analystsor employeescanbeheld responsible for any financial consequencesarisingoutof theuseof informationprovidedherein.However, in caseof anydiscrepancy, error,etc., samemaypleasebebrought to thenoticeofCII for appropriate corrections. PublishedbyConfederationof Indian Industry (CII), TheMantoshSondhiCentre; 23, InstitutionalArea, LodiRoad,NewDelhi-110003 (INDIA), Tel:+91-11-24629994-7, Fax:+91-11-24626149;Email: [email protected];Web:www.cii.in

ASCON INDUSTRY SURVEY • juNE 2017 1

EXECuTIVE SuMMARY

TheCII ASCON Industry Survey,which tracks the growth of the industrial sectorthrough responses collected from sectoral industry associations, reveals anacceleration in demand reflected through an overall improvement in capacity

utilizationinQ4FY17aswellasanimprovementintheinvestmentoutlookoftheprivatesector inH1FY18.

Out of the 82 sectors surveyed, around 60 percent of the respondents have reportedcapacityutilization in the rangeof50 to75percent forJanuary–MarchFY17quarter,registeringasignificantimprovementfromthepreviousquarterwhereinvariousindustrieshadwitnesseddisruptionsinproductionduringNovemberandDecemberonaccountofdemonetization.30percentofrespondentsreportedcapacityutilizationtobeintherangeof 50-75percent inQ3FY17.Existenceof surplus capacity alongwithweak corporatebalance sheetshavekept corporates fromannouncingadditionof newcapacities.

In terms of the industry outlook for the next sixmonths, 64.3 percent of respondentsexpect improvement intheoverallbusinesssituation. In fact,mostrespondentsexpectneworderstoimprove,albeitmoderately,overthenextsixmonths.Further,therearenoexpectationsofdeteriorationwith respect to stalledprojects for thenext twoquarters.This clearly signals a strengthening of fundamentals. The Survey responses suggestthat initiatives takenby thegovernment in the last three years in termsof expeditiousprojectclearances,simplificationofproceduresandeaseofdoingbusinessareexpectedto lift the investment andbusiness scenariogoing forward.

IncontrasttoearlierSurveys,theSurveyresultspointtowardearlysignsofimprovementin theprivate investmentcycle in thenextsixmonths.Accordingto theSurvey,onthenew investments front, 44.4 percent of respondents expectmoderate improvement inH1FY18, while 11.2 percent of respondents expect sharp improvement. 44.4 percentoftherespondentsexpectthesituationtoremainthesame.W.r.t.stalledprojects,88.9percentof the respondentsexpect the situation to improvemoderately.

TheCIIASCONIndustrySurveyclassifiesthegrowthtrendsacrossfourbroadcategories,namely ‘Excellent’ (>20%), ‘High’ (10-20%), ‘Moderate’ (0-10%)and ‘Low’ (<0%).TheSurveyrevealsamoderationofproductiongrowthtrends inQ4(January–March)FY17quarterover thecorrespondingquarterayearago.Thiscorroborateswith therecentlyreleasedGDPfiguresforQ4FY17.AccordingtotheSurvey,manysectorsarecontinuingtowitness ‘Moderate’ growth trendswith ‘Excellent’ and ‘High’ growth limited only toselect sectors. Therehasbeena substantial rise in sectorswitnessing ‘Low’growth.

2 ASCON INDUSTRY SURVEY • juNE 2017

Out of the 82 sectors surveyed, there has been a decline in the share of sectorsregistering ‘Excellent’ growth (>20%) and ‘High’ growth (10-20%) in the surveyedquarter as compared to the year ago period. According to the Survey, the share ofsectors witnessing ‘Excellent’ growth in Q4FY17 has declined slightly to 8.5 percent(7 out of 82) as against 9.8 percent (8 out of 82) as in the same quarter a year agoperiod. The shares of sectors witnessing ‘High’ growth has significantly come downto 13.4percent (11out of 82) from25.6percent (21out of 82) recorded in the samequarterprevious year.

Atthesametime,whiletheshareofsectorswitnessing‘Moderate’growthhasmarginallygoneupto40.2percent(33outof82)intheJanuary–MarchFY17from36.6percent(30outof82)duringthecorrespondingperiodayearago,theshareofsectorsrecording‘Low’ growth has increased substantially to 37.8 percent (31 out of 82) as against 28percent (23outof 82) in the samequarter a year ago.

A further analysis of the sectors at the aggregated levelwith industry being classifiedinto broad segments in terms of performance of production viz Excellent and High(above 10 percent) on one hand and Moderate and Low (below 10 percent) on theother, reaffirms our perception of moderation in the growth trends in the surveyedquarter. This is evident from the fact that only around one–fifth of the sectors (21.9percent)have registeredgrowthgreater than10percent inFY17ascompared to36.6percent sectors witnessing >10 percent growth in Q4FY16. According to the Surveyresults, 78 percent of the sectors surveyed remained below 10 percent growth levelsin the surveyedquarter.

Analysis of growth trends on a sequential quarter-on-quarter basis also presentsmoderation in the growth trends in Q4FY17 as compared to Q3FY17. According totheSurvey,whiletherehasbeenmarginaldecreaseinthesectorsreporting‘Excellent’growth, there has been a slight increase in the share of the sectors reporting ‘High’growth.Theshareofsectorsreporting‘High’growthhasincreasedto13.4percent(11outof 82) inQ4FY17 from9.8percent (8outof 82)witnessed inQ3FY17.

Ontheotherhand,theshareofsectorsrecording‘Moderate’growthhascomedownto40.2percent(33outof82sectors)ascomparedto42.7percent(35outof82sectors)inQ3FY17.Thenumbersofsectors recording ‘Low’growthhas increasedsignificantlywith37.8percent (31outof82sectors) inQ4FY17asagainst32.9percent (27outof82 sectors) inQ3FY17.

With respect to issuesandconcerns impactinggrowth, high taxburden (66.7%), lackof domestic demand (57.1%), cost and availability of finance (45.5%), high regulatoryburden(44.4%)andtransportinfrastructurebottlenecks(44.4%)havebeencitedasthemost important constraints bymore than 40 percent of the respondents. Competitionfromimports,lackofexportdemandandmarginpressureduetostiffcompetitionwerereportedasotherpressingconstraintsbefore companies.


Tofurtherpushthepaceofrecoveryineconomicandindustrialgrowth,therespondentsto the CII ASCON Industry Survey have suggested an array of measures to boostthe economy. Some such steps include a reduction in interest rates, lowering thecorporate tax rate to18percent,continuingwitheaseofdoingbusiness reformswithafocusonreducingintransactioncosts,supportingdemandcreationthrougheffectiveimplementationofboth thePublicProcurementPolicyand theNationalCapitalGoodsPolicy and creating specific schemes for supporting MSMEs to integrate with GlobalValuechainsamongothers.


ECONOMIC OVERVIEW

Since our last Survey, there has been a gradual improvement in the global macro-economicenvironment.Lead incoming indicatorspoint towards improvement inglobalrecovery in 2017-18. The latest assessment of the global economy (World EconomicoutlookReportApril 2017)of the IMF suggests that after a lackluster outturn in 2016,economicactivityisprojectedtopickuppacein2017bothinAdvancedEconomiesandintheEmergingMarketandDevelopingEconomies(EMDE).Themultilateralbodyraiseditsprojection forworldGDPgrowth to3.5% in2017,up from3.4%providedearlier inJan-17(vis-à-vis2016growthof3.1%)onthebackofrobusteconomicdata,improvingglobaldemandcoupledwithhigher commodityprices.TheGlobalManufacturingPMIcontinued to consolidate in the expansion zone. The PMI has remained above theneutral 50.0mark throughout thepast 12months.

On domestic front, there have been mixed signals of growth. While the estimates ofthe GDP growth for FY17 indicate a relatively slower growth for the Indian economyat7.1percentasagainst7.9percent inFY16, India,at7.1percentwillcontinue tobeoneof the fastestgrowingemergingmarket economies.

Onaquarter-on-quarterbasis,India’seconomicgrowthslowedforthefourthconsecutivequarter in the threemonths endedMarch.Mirroring the impact of demonetization onkey sectors, the GDP registered an eight-quarter low of 6.1 percent in Q4FY17 asagainst 7.9 percent inQ4FY16. At the same time,Gross ValueAdded (GVA) at basicpricesstoodat5.6percentQ4FY17 from6.6percent in theprecedingquarter.Almostall sectors,with theexceptionof agriculture, showeddeceleration inQ4FY17.

Indicating normalization of growth conditionswith the progress of the re-monetizationprocess, theother lead indicators releasedduring thefirstfivemonthsof thecalendarpoint towardsmodest improvement in themacroeconomic outlook. Survey indicatorssuchasPMIs(bothManufacturingandServices)continuedtobeintheexpansionmodein 2017.PMIManufacturing registered a continued improvement in themanufacturingconditions for the fourth straight month in April before slowing to a three-month lowof 51.6 inMay. PMIServices continued tomove in expansion territory sinceFebruary2017 and posted the highest rise in May 2017 (52.3) since October. Reflecting anacceleration in the activity trends across the combined manufacturing and servicessector, the seasonally adjusted Nikkei India Composite PMI Output Index rose to asevenmonthhighof 52.5 inMay.

Growth in infrastructure sector for FY17 was 4.8 per cent as compared to 3.0 per


cent in the fiscalbefore.While core sectorgrowthexpandedat ameagre2.9percentduringthefirstfourmonthsof2017asagainst7.1percentsameperiodyearago,coresector output is likely to receive a further fillip amidst traction in road projects, focuson infrastructureprojectsandhousingprojects.Asper thenewseriesof IIP, industrialproductiongrewat5.0percentasagainst3.4percentduringthelastfiscal.Manufacturingsectorgrowth stoodat 4.9percent inFY17as compared to3.0percent inFY16.

Signalingaturnaroundintheglobaldemandfordomesticgoods,exportsgrewby27.2percentYoY inMarch2017 thusgrowing for theeight consecutivemonths.Ony-on-ybasis,India’smerchandiseexportsregisteredasharpincreaseingrowthinFY17to5.4percentasagainstadecelerationof -15.4percent last year.Growth inexportsposteda surprisingly sharp expansion to 18.5 percent inQ4FY17 as compared to 6 percentinQ3FY17and (-7.8%)and (-19.1%) inQ4FY16andQ3FY16 respectively.

On the investment front, the recovery continues to remain slow. The data shows thatnotwithstandinggovernment’scontinuedeffortsatrevivingcapex,investmentsremainedmuted in FY17. The gross fixed capital formation (GFCF) continued to remain weakand recorded0.6percentgrowth inFY17asagainsta6.1percentgrowth inFY16. InQ4FY17,GFCF slipped into negative territory and registered a growth of -2.1 percentagainst1.7percentinQ3FY17.Atthesametime,theGovernmentspendingexpenditurecomponent of GDP has posted impressive double-digits growth in FY17. Further,advancement of the Union Budget to allow time to ministries to start their spendingfrom the very beginning of the new fiscal year 2017-18 has resulted in an increasedallocation for capital expenditure to support thecapexcycle.Thesharpcontraction inthe investmentcomponent ishowever in linewith theongroundexperience indicatingprivate capexandcapacityutilization.

Onthebankingfront,grossnon-performingassets(NPAs),orbadloans,ofstateownedbankssurged56.4percentduringthe12-monthperiodendedDecember2016.Astrongpolicy impetus toenforce robust assetquality recognitionacrossPublicSectorBanks(PSBs)hasinducedaconsiderableuptickinNPAs.AsaresultofAssetQualityReview(AQR) initiatedby theRBI inDecember2015, intended to lead toa full recognitionofNPAs by March 2017, NPA slippages across PSBs have accelerated noticeably, andaggregateNPAratioincreasedto9.8percent in2015-16,from5percentayearearlier.Agradual recovery in theoverall economyand implementationof newermechanismsof faster resolution of stressed assets will pave the way for an improvement in assetquality forbanksgoingahead.

Inflation, both through Consumer Price Index (CPI) & Wholesale Price Index (WPI),corrected, with the former easing to a series low. As retail inflation dropped to anall-time low of 2.18 percent in May, it undershot the upper limit of inflation since theReserveBankof India’s(RBI)hadsetamid-termtargetof4percent for the lastsevenmonths.Withinflationaryrisksnotmaterializingtotheextentexpected,thecentralbankreduced itsCPI forecasts.Thecentralbanknowexpects inflationat2.0-3.5percent inH1FY18.


On the reforms front, with the passage of four GST Bills— the Central GST bill, theIntegratedGSTbill,theUnionTerritoryGSTbill,andtheGST(CompensationtoStates)Billpavedthewayfortherollingoutofanindirecttaxregimethatwill,forthefirsttime,economically unify the country. GST is to be implemented by July 1, 2017.With theviewof further liberalizing FDI, Foreign InvestmentPromotionBoard (FIPB), a 25-yearold foreign investment advisorybodywasabolished this year in order to attractmoreFDIbyprovidingquickapprovalsunder a single-windowclearance system.

Overall,therecoveryhasremainedonaslowertrackinFY17.Whileseveralfactorssuchasprognosisofanormalmonsoon,implementationofGST,government’scommitmentto fiscal targets and the thrust on boosting infrastructure and ease of doing businesscouldbrighten the investment climategoing forward.


CII ASCON Industry Survey Results

2.1 Methodology

Confederationof IndianIndustry(CII)conductedtheCIIASCONIndustrySurveytoascertaintheperformanceofindustryduringJanuary-March(estimated)(Q4)FY17 against the year ago period and against the previous quarter, January-

March (Q4)FY16. TheSurveywasconductedoverApril 2017 tillmidofMay2017.

TheSurvey isbasedonthe feedbackcollectedfromindustryassociationsandvariousmanufacturingrelatedcompanies,numberingmorethan35,000.ThecompaniescoveredintheSurveyrepresentawidespectrumofsectorsincludingbasicgoods,intermediategoods,capitalgoods,consumerdurablesandnon-durablesandservices.Theanalysisfor the surveyedquarter isbasedon the responses received for 82 sectors.

Based on varying rates of growth of industrial production at the sectoral level, theresponseshavebeensegregated in thefollowingfourbroadcategories: (i) ‘Excellent’(growth in excess of 20%), (ii) ‘High’ (growth in the range of 10-20%), (iii) ‘Moderate’(growth in the rangeof 0-10%)and (iv) ‘Low’ (growth less than0%).

2.2 Industry growth performance during january - March FY17 over january - March FY16

The results of the latest CII ASCON Industry Survey for January -March FY17 reveala moderation of growth trends in terms of production in Q4FY17 quarter over thecorrespondingquarterayearago.Thisisborneoutofthefactthatoutofthe82sectorssurveyed,therehasbeenadeclineintheshareofsectorsregistering‘Excellent’growth(>20%) and ‘High’ growth (10-20%) in the surveyedquarter as compared to the yearagoperiod,at thesame time,while theshareofsectorswitnessing ‘Moderate’growth(0-10%) growth has gone upmarginally, the sectors witnessing ‘Low’ growth (< 0%)has increased sharply in theQ4FY17as compared to the year agoperiod.

AccordingtotheSurvey,theshareofsectorswitnessing‘Excellent’ growthinQ4FY17has slightly declined to 8.5 percent (7 out of 82) as against 9.8 percent (8 out of 82)in thesamequarterayearagoperiod.Thesharesofsectorswitnessing‘High’growthhas significantly comedown to13.4percent (11out of 82) from25.6percent (21outof 82) recorded in the samequarterprevious year.


Figure 2.1: Industry performance Q4 FY17 over Q4 FY16 (in %)

Atthesametime,whiletheshareofsectorswitnessing‘Moderate’growthhasmarginallygoneup to40.2percent (33outof82) in theJanuary–MarchFY17 from36.6 percent(30 out of 82) during the corresponding period a year ago. The number of sectorsrecording‘Low’growthhassurgedsubstantiallyto37.8percent(31outof82)asagainst28percent (23outof 82) in the samequarterprevious year.

A further analysis of the sectors at the aggregated levelwith industry being classifiedinto broad segments in terms of performance of production viz ‘Excellent’ and ‘High’(above10percent)ononehandand ‘Moderate’and ‘Low’ (below10percent)on theother,reaffirmsourperceptionofmoderationinthegrowthtrendsinthesurveyedquarter.This is evident from the fact that only 21.9 percent of sectors have registered growthgreater than10percent inFY17ascompared to35.4percentsectorswitnessing>10percent growth inQ4FY16.According to the survey results, 78percent of the sectorssurveyed remainedbelow10percentgrowth levels in the surveyedquarter.

2.3 Industry growth performance during Q4FY17 over Q3FY17

Afurtheranalysisofgrowthtrendsonasequentialquarter-on-quarterbasisalsorevealsmoderation inthegrowthtrendsinQ4FY17ascomparedtoQ3FY17.AccordingtotheSurvey, while there has been amarginal decrease in the sectors reporting ‘Excellent’growth, there has been a slight increase in the share of the sectors reporting ‘High’growth.Theshareofsectorsreporting‘High’growthhasincreasedto13.4percent(11outof 82) inQ4FY17 from9.8percent (8outof 82)witnessed inQ3FY17.

Industry performance Q4 FY17 over Q4 FY16 (in %)

9.8

8.5

7.5

8.0

8.5

9.0

9.5

10.0Excellent

January-March FY16January-March FY17

25.6

13.4

5.0

10.0

15.0

20.0

25.0

30.0High


36.640.2

25.0

30.0

35.0

40.0

45.0Moderate


28.0

37.8

10.015.020.025.030.035.040.0

Low

January-March FY16

January-March FY17


On the other hand, the share of sectors recording ‘Moderate’ growth has reduced to40.2percent(33outof82sectors) inQ4FY17ascomparedto42.7percent(35outof82sectors) inQ3FY17.Thenumbersofsectors recording ‘Low’growthhas increasedto 37.8 percent (31 out of 82 sectors) in Q4FY17 as against 32.9 percent (27 out of82 sectors) inQ3FY17.

Figure 2.2 Industry performance Q4FY17 over Q3FY17 (in %)

2.3 Capacity utilization

With respect tocapacityutilisation,outof the82sectorssurveyed,around60percenthavereportedcapacityutilization in therangeof50to75percent forJanuary–MarchFY17 quarter, registering a significant improvement from the previous quarterwhereinvarious industries had witnessed disruptions in production during November andDecember on account of demonetization (figure 2.4). 30 percent of the respondentsreportedcapacityutilizationtobeintherangeof50-75percentinQ3FY17.EstimatesforQ1FY18indicateamaintainedrateofcapacityutilisation.Existenceofsurpluscapacityalong with weak corporate balance sheets have kept corporates from announcingadditionof newcapacities.

Industry performance Q4 FY17 over Q3 FY17 (in %)

14.6

8.5

5.0

10.0

15.0

20.0Excellent

October-December FY17January March FY17

9.8

13.4

0.0

5.0

10.0

15.0

High


42.740.2

25.0

30.0

35.0

40.0

45.0Moderate


32.9

37.8

30.0

35.0

40.0Low



Figure 2.4: Capacity utilization trends

Figure 2.5: Issues and Constraints

With respect to issuesandconcerns impactinggrowth, high taxburden (66.7%), lackof domestic demand (57.1%), cost and availability of finance (45.5%), high regulatoryburden(44.4%)andtransportinfrastructurebottlenecks(44.4%)havebeencitedasthemost important constraints bymore than 40 percent of the respondents. Competitionfromimports,lackofexportdemandandmarginpressureduetostiffcompetitionwerereportedasotherpressingconstraintsbefore companies.

3. Outlook for next six months

On the industry outlook for the next six months, 64.3 percent of respondents expectimprovement in theoverall business situation in thenext twoquarters.

Figure 2.4: Capacity Utilization trends

Actual (October-December

2016)

Current (Jan-March 2017)

Expected (April- June 2017)

30.0

40.0

30.0

(Oct-Dec 2016)

Below 50% 50-75%

75-100% Above 100%

10.0

60.0

30.0

(Jan-March 2017)

Below 50% 50-75%

75-100% Above 100%

10.0

60.0

30.0

(Apr-June 2017)

Below 50% 50-75%

75-100% Above 100%

Figure 2.5: Issues and Constraints

0.0

10.0

20.0

20.0

22.2

33.3

33.3

44.4

44.4

45.5

57.1

66.7

50.0

60.0

10.0

20.0

33.3

55.6

11.1

22.2

44.4

36.4

57.1

22.2

50.0

20.0

60.0

60.0

22.2

11.1

11.1

33.3

18.2

42.9

11.1

10.0

10.0

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Industrial Relations / Labour Problems

Shortage of skilled labour/Talent

Shortage of Raw Materials

Shortage of Power

Lack of Export Demand

Margin Pressure due to stiff competition

Competition from Imports

Regulatory Burden

Transport Infrastructure Bottlenecks

Cost and Availability of Finance

Lack of Domestic Demand

High Tax Burden

Most Important Moderately Important, Less Important, Not Important


IncontrasttoearlierSurveys,theSurveyresultspointtowardearlysignsofimprovementintheprivateinvestmentcycleinthenextsixmonths.AccordingtotheSurvey,onthenew investments front, 44.4 percent of respondents expectmoderate improvement inH1FY18,while11.2percentofrespondentsexpectsharpimprovement.44.4percentofthe respondents expect the situation to remain the same. W.r.t. stalled projects, 88.9percentof the respondentsexpect the situation to improvemoderately.

Figure 3.1: Investment outlook for the next six months

Itisnoteworthythatmostrespondentsexpectneworderstoimprove,albeitmoderately,overthenextsixmonths.Further,therearenoexpectationsofdeteriorationwithrespectto stalled projects for the next two quarters. This clearly signals a strengthening offundamentals. TheSurvey responses suggest that initiatives takenby thegovernmentin the last three years in terms of expeditious project clearances, simplification ofproceduresandeaseofdoingbusinessareexpectedtolifttheinvestmentandbusinessscenariogoing forward.

Figure 3.2: Business outlook for the next six months

Figure 3.1: Investment outlook for the next six months

New Orders New Investments Stalled projects

More than 3/5th expect new orders to improve

moderately

Almost half expect the situation on new

investments to improve moderately

More than 4/5th of the respondents expect the

stalled projects to decrease

72.7

27.3

New Orders

will improve sharplywill improve moderatelywill remain samewill decline moderatelywill decline sharply

44.4

44.4

11.2

New Investments


88.9

11.1

Stalled projects


Figure 3.2: Business outlook for the next six months

Sales Exports Imports Around 3/5th of

respondents expect the situation to improve

moderately

Around half of respondents expect the

situation to remain same

3/5th of the respondents expect the situation to

remain same

57.1

21.4

14.3 7.2

Sales


11.1

22.2

44.4

11.1

11.1

Exports


10.030.0

60.0

Imports



Reflecting improvements in demand conditions going forward, 57.1 percent of therespondents expect the situation to improvemoderately in the next two quarters. Ontheexportsfront,whilearound11.1percentofrespondentsexpectthesituationontheexports front to improve sharply, 22.2 percent of respondents expect the situation onexports to improvemoderatelywhile 44.4 percent of the respondents are of the viewthat the situationwill remain the same in the next two quarters.On the imports front,60percentof respondentsexpect the situation to remain static.

Conclusion

Overall, the acceleration in demand reflected through the overall improvement incapacityutilizationaswell asan improvement in the investmentoutlookof theprivatesectorinQ4FY17isindeedawelcomesign.However,themoderationinthe‘Excellent’and ‘High’growth trendswarrantattention tocontinual structural reform toensure thenecessarygrowthmomentumandtoensurethatgrowthisbroadbasedinthecomingquarters.


Industry Suggestions

Tofurtherpushthepaceofrecoveryineconomicandindustrialgrowth,therespondentsto theCIIASCON IndustrySurveyhave suggested the followingbroadmeasures:

Withmoreeconomicactivityentering the taxnetpost-demonetization,government•should lower the corporate tax rate to 18 percent. This is suggested withoutexemptionsand incentives.

Reduction in Cost of finance• :ItisimportantthattheRBItakesnoteoftheconsistentlyweakperformanceofindustryandacceleratethereductionininterestrates.Industryhopesaround25bpscut inpolicy rates in theupcomingmid-policy review.

Demand Creation• : Effective implementation of the Public Procurement Policyand the National Capital Goods Policy, rethinking and streamlining of variousprocurement policies at the state and local level should support in bolsteringdomesticdemand.

Ensuring availability of raw materials• ofstrategicimportanceforthemanufacturingindustry at globally competitive prices; facilitating sourcing. Expedite creation ofcomponent tradinghubs for regular supply/availability of components forMSME.

Supporting Local production of Raw Materials• :ReviewingFTAs,correctinginvertedduty structureson rawmaterials forproviding level playing fieldwith imports.

Ensuringavailabilityofqualitypowertotheindustry;Makingopenaccesstopower•hassle-free.

Focusing on reducing transaction costs• by enabling amore conducive taxationsystemalongwith relatively flexible labor and land-acquisition laws.

Reducing Logistics cost• -Layingawell-structuredplan fordeveloping theexportecosystem;Developingandpromotingcoastalshippingandinlandwatertransport;expediting action on reforms related to trade and business environment. Provideeaseofdoingbusiness for tradingacrossborders asper international standards.

Creation of Common Facility Centers• forTraining,Testing,ProductDevelopment,Designetc.

Building Component Trading Hub• to triggerdevelopmentofeco-systemrequiredfor industries suchasdomesticelectronicand IThardwaregoodsand reduce the


cost and timeofprocurementof componentsby thedomesticmanufacturers.

Discouraging import of second hand machinery• formodernization;discouragingimport of cheap and obsolete technology/machinery by providing necessarysafeguards.

Helping MSMEs to integrate with Global Value chains• :

– Creating specific schemes for providing Fiscal support for Research andDevelopment e.g. TechnologyUpgradationFundScheme.

– Encouragingmultinational corporations and large corporation todevelop keyvendor capabilities amongMSMEs tohelp themmoveup the valuechain.

– Creating funds for facilitating R&D among MSMEs and facilitating ease ofdoingbusiness forMSMEsaresomeof themeasures thatcouldbetakenuptohelpMSMEs integratewithGVC.

– Creating facilitation centers for helping them inovercomingcompliancesandregulatoryhindrances.


APPENDIX

AppendixA: Sample coverageandmethodology

TheCIIASCONIndustrySurvey,whichtracksthegrowthofdifferentindustrialandservicessectorsoftheeconomy,isbasedonthefeedbackcollectedfromindustryassociationsaffiliated to CII. The industry associations encompasswide range of sectors from thedomainofsmall,mediumand largeenterprisesspreadover the lengthandbreadthofthecountry.Further,theSurveyhasenumeratedresponsesfrombothpublicandprivatesectors. The companies covered in the Survey represent a wide spectrum of sectorsincludingbasicgoods,intermediategoods,capitalgoods,consumerdurablesandnon-durables and services sector. In most of the cases, these account for approximately70%of the total industryoutput in the respective sectors.

The analysis is based on two quarters: January –March FY17 (estimated) andOctober-DecemberFY17 (actual). The resultsof eachquarterarecomparedwith theircorrespondingvaluesofpreviousyear.Theanalysis for January–MarchFY17and forOctober-December is based on 82 responses. The sample covers all sectors of theuse-basedclassificationand their summary isdescribed inTableA.1

Table A1: Sample Coverage: Use-based classification of sectors

Sectors january –March FY17 October – December FY17

Basic Goods 26 26

IntermediateGoods 13 13

CapitalGoods 8 8

ConsumerDurables 13 13

Consumernon-durables 16 16

Other including services 6 6

Total 82 82

Based on varying rates of growth of industrial production, the responses have beencollected in the following four broad categories: (i) ‘Excellent’ (growth in excess of20%), (ii) ‘High’ (growth in the range of 10-20%), (iii) ‘Moderate’ (growth in the rangeof 0-10%), and (iv) ‘Low’ (growth less than0%).


Appendix B: Distribution of total sample sectors over different growth ranges

Table B1: Production (jan-March FY17 over FY16)

Excellent High Moderate Low•GroundnutOil •Bauxite •Ball&RollerBearings •ATF• IronOre •CircuitBreakers (HT) •Beer •Bitumen•LDO •DomesticCargo •Chromite •Capacitors (LT&HT)•PackagingPaper /Board •ForeignTouristArrivals •CircuitBreakers (LT) •Cement•Soya •MachineTools •Coal •CrudeOil

•Sunflower •Mopeds•ConstructionEquipmentMachinery

•DAP

•Tractors •MotorStarters •Electricity •Diesel•OtherOil •Glass Products •DistributionTransformer•Steel •GoodsCarrier (3W) •EnergyMeters•TextileMachinery •GoodsCarriers (LCVs) •Fertilizer•UtilityVehicles(UVs) •HydroElectric •GoodsCarriers (M&HCVs)

• IndustrialGases • ImportedOils• InternationalCargo •Kerosene•Lignite •Lubes•Limestone •MGVariety /Poster•Motors (LT) •Motor cycles/Step-Throughs•Naphta •Motors (HT)•NaturalGas •NP/NPK•NylonFilamentYarn •Nuclear•PassengerCars •PassengerCarrier (3W)

•Petrol •PassengerCarriers (LCVs)•PolyesterFilamentYarn •PassengerCarriers (M&HCVs)•Polyutherene •PetroleumRefinery•PowerCables -PVC&XLPE •PolyesterStapleFibre•PowerTransformer •Relay/ControlPanel•Railways •SpecialtyPaper•Rape/Mustard •Sugar

•Scooter/Scooterettee •Tea•Sponge Iron •TransmissionLineTowers•SSP •Urea•Steel re rollers •Writing&PrintingPaper

•Thermal•TotalEdibleOils•Vans


Table B2: Sales (jan-March FY17 over FY16)

Excellent High Moderate Low

•UtilityVehicles(UVs) •MOP •PolyesterFilamentYarn •NKP/NP

•MachineTools • IndustrialGases •Urea

•Tractors •Ball&RollerBearings •SSP

•Mopeds •POLYURETHANE •PolyesterStapleFibre

•Tourism (Earnings) •NylonFilamentYarn •DAP

•Beer •Scooter/Scooterettee

•PassengerCarriers(M&HCVs)

•FreightEarnings(Railway)

•TextileMachinery •Motor cycles/Step-Throughs

•Vans •Sugar

•GoodsCarriers (M&HCVs) •PassengerCarrier (3W)

•PassengerCarriers (LCVs)

•GoodsCarriers (LCVs)

•PassengerCars

•GoodsCarrier (3W)

Table B3: Exports (jan-March FY17 over FY16)

Excellent High Moderate Low

•GoodsCarriers (M&HCVs) •MachineTools • IndustrialGasPlant •TextileMachinery

•Mopeds •PassengerCars •Ball&RollerBearings •PolyesterFilamentYarn

•NylonFilamentYarn •Express Industry

•PolyesterStapleFibre •Scooter/Scooterettee•Motor cycles/Step-Throughs

•UtilityVehicles(UVs)

•GoodsCarrier (3W)

•PassengerCarriers(M&HCVs)

•PassengerCarriers (LCVs)

•PassengerCarrier (3W)

•GoodsCarriers (LCVs)

•Vans

The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the development of India, partnering industry, Government, and civil society, through advisory and consultative processes.

CII is a non-government, not-for-profit, industry-led and industry-managed organization, playing a proactive role in India’s development process. Founded in 1895, India’s premier business association has over 8,300 members, from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 200,000 enterprises from around 250 national and regional sectoral industry bodies.

CII charts change by working closely with Government on policy issues, interfacing with thought leaders, and enhancing efficiency, competitiveness and business opportunities for industry through a range of specialized services and strategic global linkages. It also provides a platform for consensus-building and networking on key issues.

Extending its agenda beyond business, CII assists industry to identify and execute corporate citizenship programmes. Partnerships with civil society organizations carry forward corporate initiatives for integrated and inclusive development across diverse domains including affirmative action, healthcare, education, livelihood, diversity management, skill development, empowerment of women, and water, to name a few.

The CII theme for 2017-18, India Together: Inclusive. Ahead. Responsible emphasizes Industry’s role in partnering Government to accelerate India’s growth and development. The focus will be on key enablers such as job creation; skill development and training; affirmative action; women parity; new models of development; sustainability; corporate social responsibility, governance and transparency.

With 66 offices, including 9 Centres of Excellence, in India, and 10 overseas offices in Australia, Bahrain, China, Egypt, France, Germany, Singapore, South Africa, UK, and USA, as well as institutional partnerships with 344 counterpart organizations in 129 countries, CII serves as a reference point for Indian industry and the international business community.

Confederation of Indian IndustryThe Mantosh Sondhi Centre

23, Institutional Area, Lodi Road, New Delhi – 110 003 (India)T : 91 11 45771000 / 24629994-7 • F : 91 11 24626149

E : [email protected] • W : www.cii.in

Reach us via our Membership Helpline: 00-91-124-4592966 / 00-91-99104 46244 CII Helpline Toll free No: 1800-103-1244

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Documents

€¦ · Economy Overview 4 2. CII ASCON Industry Survey Results 7 2.1 Methodology 2.2 Industrial growth performance: January -March; FY17 over FY16 2.3 Comparison of growth performance