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Last updated: 15 Dec, 2019  

Industry.9.4.Thmb.jpg Demand slowdown

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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.

 
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