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BUSINESS BRIEFS

Monday, October 14, 2013

Factory Output Growth Slips to 0.6% in August
Industrial output growth slowed in August after staging a tentative recovery in the previous month, dragged down by continued weakness in the manufacturing and mining sectors, raising fresh worries for the government. Official data released on Friday showed industrial output rose 0.6% in August compared to a 2% expansion in the year earlier month and slower than the July’s upwardly revised 2.75% growth.

The manufacturing sector fell 0.1% in August compared to 2.4% expansion in August 2012 while the mining sector contracted 0.2% compared to a decline of 0.3% in the previous year-ago period. India Inc stepped up calls for cutting interest rates to boost demand and jumpstart industrial activity. The capital goods sector, which is a key gauge of industrial activity, fell 2% in August compared to a contraction of 4.4% in August 2012 while the consumer durables sector fell 7.6% in August compared to an expansion of 1% in the year earlier month. The factory output data remained volatile, making it difficult to derive a trend but there is agreement that the sector is passing through a prolonged slowdown. The industrial segment has been hit hard by a combination of factors ranging from stubborn inflation, high interest rates, slowing demand, regulatory and policy delays.

Economists said there is need to resolve issues related to the mining sector and undertake urgent reform steps to reverse the trend in the industrial sector. Rating agency Crisil said excluding the exceptionally high growth of over 25% in ‘wearing apparel’ and ‘electrical machinery and apparatus’, industrial production in fact fell by 1.1% in August, compared to a year ago.

“The output of consumption-oriented industries is expected to pick-up in the second half of 2013-14 due to higher rural incomes, on the back of a good monsoon and consequent high agricultural production,” Crisil said. “However, a sustained turnaround of industrial output hinges on a resolution of issues plaguing the mining sector, addressing supply-side bottlenecks in infrastructure and the ability of the government to speed up clearances of projects,” the rating agency said.

Industry group said there is a need to cut rates to boost festival demand. “Looking at the negative growth in consumer durables, at this juncture increased lending to consumers at lower interest rates will greatly benefit industry by encouraging festival season demand,” said Naina Lal Kidwai, President Ficci.
“Ficci-PwC’s recent survey has found that high interest rates are considered a key factor in limiting growth in the next twelve months,” said Kidwai.

Net FDI Inflows Grew 50% In Q1 FY14 On Reforms
Driven by the government’s recent reform measures, India’s net foreign direct investment (FDI) inflows recorded over 50 per cent growth during the April-July quarter of the current fiscal. Net FDI inflows rose to USD 8.2 billion during the period April-July 2013 from USD 5.4 billion during the corresponding period of the previous year, according to a study by PHD Chamber of Commerce. “Increase in net FDI inflows is attributed to the recent reforms undertaken by the Government enacted in the FDI policy regime where it opened up various sectors of the economy to foreign investors,” President of PHD Chamber of Commerce & Industry Suman Jyoti Khaitan said.

India Inc’s 9-Month M&A Deal Tally At $24 Bn
Indian M&A market showed moderate levels of deal activity in the first nine months of this year with 377 deals amounting to USD 23.9 billion. According to a survey by tax advisory firm Grant Thornton, with just 377 transactions, the deal activity during the period was significantly lower than the previous years. Correspondingly, in the January-September period of 2012, corporate India had announced 438 deals, while in 2011 it was as high as 461. In terms of deal value as well, there has been a significant decline in the last two years. In 2012, it was USD 28.16 billion and in 2011, USD 37.31 billion.

Volkswagen India Expands Its Export Activities
German engineering made in India by Volkswagen is in great demand worldwide. After having entered two continents ­– Asia and Africa – the Volkswagen Vento, manufactured at Pune Plant, will now be seen on the streets of a third continent – North America. Volkswagen India commenced export of cars manufactured at its Pune Plant in 2011 with the export to South Africa and entered the Left-Hand Drive market in 2012 with the export to Middle East countries. The next big step in the growth strategy of Volkswagen India is the expansion of exports of the Left-Hand Drive Vento to the Mexican market. In a full production year, every second car from the export volumes manufactured at the Pune Plant will go to Mexico, thus making it the single largest export market for Volkswagen India.

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