Industrial production data for March’18 is a little disappointing

Posted on: 15 May, 2018

But keeping in view the fact that not full production data of various items are compiled within the scheduled time, the revised data for March’18 that would be made available after 2-3 months would make up the shortfall in the rising trend.

Image Source: Steek Industries

Industrial production data for March’18 is a little disappointing. But keeping in view the fact that not full production data of various items are compiled within the scheduled time, the revised data for March’18 that would be made available after 2-3 months would make up the shortfall in the rising trend. In Jan’18 IIP rose 7.4% followed by a rise of 7.1% in Feb’18. In March, the growth rate was subdued at 4.4%, making the cumulative rise of Industrial Production at only 4.3% for the full year. As manufacturing comprises nearly 78% of total industrial output, it continues to be the primary driver and could achieve 4.4% rise in March resulting in a full-year growth of 4.5%.

Last year, IIP and manufacturing grew 4.6% and 4.4%, respectively, and therefore the critical industrial segments like steel, cement and refineries could obtain a higher production rate in FY18 (steel production increased 5.6%, cement production by 6.3% and refineries by 4.6%) due to a rise in manufacturing and IIP during the year.

The trend growth of IIP and manufacturing indicates a differential view of specific industrial components. Although electricity generation rose 5.4% during the year, the manufacturing of electrical equipments went down 12.6% during FY18. This happened as there was no indigenous availability of CRGO sheet required for electric transformers. It is to be noted that imports of electrical sheets at 0.6 MT went up by 104%, domestic production of ESS (at only 0.26 MT) dropped by 161% during the period. The domestic consumption of ESS was lower due to lower additions of fresh power projects.

The trend needs a speedy reversal with creation of indigenous capacity of CRGO by transfer of technology (foreign collaboration with Japan and South Korea) and higher level of domestic availability of CRNO sheets/ coils. The demand for electrical sheets is also slated to rise in the coming years on account of introduction of electric vehicles (EV).

The manufacturing of vehicles, trailers and semi trailers has gone up 12.6% during the full year. It has meant a growth of auto products at 29.1 million units at a yearly rate of around 15%. It is interesting to observe that growth of per capita income ( 5.2% rise in constant prices in FY18) has played a major role in pushing up sales of utility vehicles by 21%, light commercial vehicles by 25.4%, passenger carriers in 3-wheeler segment by 28.6% and scooters and motor cycles by 20%.

A big rise is also observed in exports of two/three wheeler vehicles by 20-40%. The manufacturing of other transport (rails and railway products, wagons and coaches, ships, barges, aircraft carriers, submarines, aircrafts etc.,) has shown a respectable growth of 14% in FY18, which should reflect in higher demand for railway materials ( 17.3% growth in the year), plates ( nearly same as last year) and structurals ( 2.2% in the year). The significant growth in consumption of railway materials has emanated from DFC, Metro Rail and doubling of lines by railways and the trend is going to remain on the rise in the coming years as well.

The capital goods sector (heavy machinery and equipment) has been experiencing a fluctuating growth. During the last 6 years, its growth went up high at 4.4% in FY18, lowest at (-) 3.7% in FY14. The 4.4% annual growth in FY18 was not high enough to pull the consumption growth of plates beyond the last year’s level.

As the value addition in construction sector has grown 4.3% during the year, which has contributed to a robust consumption of TMT bars and wire rods at around 33 MT with 2.2% growth, it is reflected in the rise in output in infrastructure and construction segments by 8.8% in March’18 and 5.5% in the full year. The production of bars and rods of alloy and stainless steel rose by a hefty 44% in March’18 to be commensurate with this rise. The yearly growth in infrastructure and construction sector in FY18 may be compared with 3.9% growth in the previous year.

Consumption of long products comprises around 56% of total steel consumption in the country, which strengthens the pattern of development of developing economies orienting towards construction sector. Last year, this share was 58%, and 58.5% in the year before last.

Gradually, the country is exhibiting the orientation towards the manufacturing sector in shaping the industrial development of the country. In the next few years, this changing nature of industrial growth would enhance the need of various sub segments in the manufacturing sector for steel categories and, hence, the component of flat products (plates, HRC, CRC, coated products, ESS and pipes) in the total steel consumption is likely to increase.

Source: Financial Express

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