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Manufacturing Growth in India to Slow in FY2010

An industrial recovery in India that shows more balance between capital and consumer goods output growth bodes well for sustainability, according to The Manufacturing Outlook in India – Amidst Slowing Output Growth, a More Balanced Manufacturing Expansion, a new report from the Manufacturers Alliance/MAPI.

The report is based uses five drivers taken from Consensus Forecasts (a product of Consensus Economics, London, United Kingdom), entered as assumptions to simulate the MAPI model – growth in gross domestic product (GDP), investment, exports, imports, and industrial production – to forecast annual output growth in 16 major Indian manufacturing sectors.

After 10.8 percent growth in Indian manufacturing in fiscal year 2009, MAPI anticipates a deceleration to 9.5 percent growth in FY 2010 (April 2010 to March 2011) before moderating further to 8.5 percent growth during FY 2011.

Fourteen of 16 sectors in both 2010 and 2011 should show gains, led by metal products and parts, anticipated to see 25 percent growth in 2010 and 13 percent growth in 2011. One other industry sector, machinery and equipment, is also expected to see double-digit growth both years, by 15 percent in 2010 and by 10 percent in 2011.

Additional double-digit industry gains in 2010 should come from nonmetallic mineral products with 15 percent growth; leather, 13 percent; rubber and petroleum, 11 percent; and cotton, and jute and other vegetable fiber, each by 10 percent. Other industries forecast to show strength in 2011 include basic metals and alloys, expected to grow by 35 percent, and basic chemicals, and textiles, each by 11 percent.

"Capital goods industries are expected to continue to be strong performers, although moderating in their growth pace," said Cliff Waldman, economist for the Manufacturers Alliance/MAPI and author of the report. "Ironically, for an economy and a manufacturing sector that weathered the global storm in strong fashion, the risks to the Indian outlook are just now asserting themselves in this period of impressive rebound.

"India needs to tackle the infrastructure and supply chain difficulties that are contributing to high inflation and develop trading relationships with emerging economies to diversify its export base. India's infrastructure efforts will continue to benefit capital goods manufacturing but policy makers need to get macro fundamentals in order or risks will grow for both economic and manufacturing growth."

© 2019 Gale Media, Inc.

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