Bikky Khosla | 15 Dec, 2019
Demand slowdown is showing little sign of recovery, both in
domestic and international fronts. Latest export figures for November released
last week reflect this situation. According to official data, exports were
marginally down to $25.98 billion from $26.07 billion while imports declined
sharply by 12.71 percent to $38.11 billion from $43.66 billion in the month on Y-o-Y
basis. While faltering exports depict fragile external demand, sharp
contraction in imports reflect weakening domestic demand.
Details data shows that only 13 out of the 30 major product
groups were in positive territory in November. Noticeably, several major
sectors including almost all labour-intensive sectors were still in negative
territory. This is a big concern. No doubt, the global demand situation is result
of prolonged trade tensions and protectionism which are largely beyond our
control, but a lot can certainly be done to address concerns like uncertainties
over MEIS scheme, pending GST and Drawback delays, notification of RoDTEP, etc.
October industrial figures also give a similar picture.
Factory output for the month contracted (-) 3.8 percent on the back of
dwindling manufacturing activity caused by subdued demand conditions. This
growth is nowhere near the rise of 8.4 percent recording in October 2018. The
manufacturing sector contracted by (-) 2.1 percent against YoY rise of 8.2
percent. In terms of industries, 18 out of 23 industry groups in the
manufacturing sector showed negative growth.This is a cause of serious concern.
Meanwhile, a sharp rise in food articles lifted November
retail inflation to 5.54 percent from 4.62 percent in October and 2.33 percent
in November 2018. Consumer Food Price Index (CFPI) inflated to 10.01 percent
against 7.89 percent in October 2019 and (-) 2.61 percent in November 2018. This
data assumes significance in the background of RBI maintaining the Repo rate on
account of rising retail inflation. This rise in inflation, combined with
stagnant demand and rising unemployment, does not augur well for the economy.
I invite your opinions.