Indian Industrial Production Cut to 8.2%: CMIE

 Centre for Monitoring Indian Economy (CMIE) has scaled down its forecast for the industrial production growth in FY 12 to 8.2 per cent from 8.7 per cent earlier.

A lower than expected production growth witnessed by a few industries in the first 2-4 months of the year and delays in commissioning of plants by companies prompted it to revise the forecast downwards, CMIE said in its monthly review here.
Delays in commissioning of power projects have caused a downward revision in the forecast for the growth in electricity generation in FY 12 to nine per cent from 10.1 per cent earlier, it said.
CMIE revised its forecast for growth in steel production in FY 12 from 12 per cent to 9.5 per cent due to a lower-than-expected growth in steel consumption in the first three months, and a shortfall of iron ore likely to be faced by the steel manufacturing units located in Karnataka, following the suspension of mining from Bellary ordered by the Supreme Court.

Postponement of project commissioning by HPCL-Mittal Energy, Essar Oil and MRPL and a lower than expected growth in the June 2011 quarter prompted us to bring down our forecast for growth in petroleum throughput in FY 12 from 9.3 per cent to 7.7 per cent. Consequently, our forecast for diesel, petrol and other petroleum products has been revised downwards, CMIE said.

CMIE : Revises India's growth Projections

Growth projections for 2011-12 scaled down to 8.1%

We have revised our real GDP growth forecast for 2011-12 downwards - from 8.6 per cent to 8.1 per cent.

The forecasts for all major sectors have been scaled down. The agricultural sector is expected to grow by 2.2 per cent (compared to our earlier estimate of 3.2 per cent), the industrial sector by 8.6 per cent (compared to 8.9 per cent) and the services sector by 9.4 per cent (compared to 9.9 per cent).

Agricultural growth rates for 2011-12 have been scaled down mainly because the fourth advance estimates for production of major crops, recently released by the Ministry of Agriculture, indicate some exceptionally high growth rates in 2010-11. These high growth rates limit the growth potential in 2011-12. Besides, the output of groundnut and cotton are expected to decline in 2011-12, because of poor rains in Gujarat and Andhra Pradesh. Production of the other crops is unlikely to grow sharply enough to offset these falls, because the base production values have been scaled up substantially by the fourth advance estimates.

Growth projections for the industrial sector have been scaled down essentially because of the slow pace in commissioning of projects. CMIE's CapEx database reveals that projects valued at an impressive Rs.8.3 lakh crore are scheduled to be commissioned in 2011-12. However, a mere 305 projects entailing an investment of Rs.63,274 crore were commissioned in the first quarter of the fiscal, while many projects have been delayed. We expect this slow creation of new capacities to hurt growth in power generation, steel and petroleum refining in 2011-12. The edible oil industry is expected to suffer because of an expected fall in the production of groundnuts.

A lower growth in production of agriculture and industry is expected to adversely impact the growth in the services sector.

Several senior government sources have admitted that the 9 per cent growth assumed in the Union Budget is unlikely to be achieved. The finance minister stated on 10 August that the economy is likely to grow by around 8 per cent. This was the lowest forecast from the government. And, it came after the forecast of 8.2 per cent made by the Prime Minister's Economic Advisory Council. The Reserve Bank of India too scaled down its forecast to 8 per cent in May 2011, while several private agencies - mostly from the financial broking arms of multinational investment companies - have scaled down their forecasts to less than 8 per cent.

Krishna Warrier