Mining and electricity output to help industrial growth in FY15

Industrial growth may rise to 4.1% on election-related expenditure and project clearances 

Industrial growth has remained fragile since financial year (FY) 2013 due to depressed consumption and sluggish investment demand. The growth decline in consumption (68.8% share in gross domestic product, or GDP, in FY13) is worrisome though not surprising given the subdued consumer sentiment, sustained high inflation and elevated financing costs. In a classic industrial revival, the impact is first felt in the consumer goods sector followed by basic/intermediate goods and finally in the capital goods sector. However, the current performance trend of the use-based sectors does not indicate such a trajectory.

Nevertheless, industrial growth is expected to improve to 4.1% in FY15 (FY14: 0.7%). This improvement will be on the back of election-related expenditure, excise duty cut for the auto sector and project clearances by the Cabinet Committee on Investment. Project clearances so far by the Committee are estimated to be around 4.6% of GDP. Assuming that only 25% of this investment materializes in FY15, it will result in investment growth of 4.1% (FY14: 0.2%). Also, there has been reasonable progress on Delhi-Mumbai Industrial Corridor and Dedicated Freight Corridor projects.

With the settlement of some legal issues, resumption of iron ore mining in Karnataka and Goa and projects worth Rs.233 billion cleared (up to 18 February 2014) in the sector by the Committee, the mining sector is poised for growth in FY15. This will also positively impact India’s external trade, balance of payment and currency by curbing coal import. Since November 2013, the sector has seen four consecutive months of positive growth.

N  NITESH KUMAR SINGH

PGDM 2ND

SOURCE-- MINT LIVE NEWS