MAPI: India To See Decelerated Growth In 2010 & 2011

The Manufacturers Alliance/MAPI has developed a new model to forecast annual output growth in 16 major Indian manufacturing sectors. After 10.7% Indian manufacturing growth in fiscal year 2009, MAPI anticipates a deceleration to 8.1% growth in FY 2010 (April 2010 to March 2011) before accelerating to 8.4% growth during FY 2011.

According to MAPI, fourteen of 16 sectors should show growth in 2010 and 2011, including three which are expected to show double digit gains in both years: transportation equipment and parts by 17% and 15%, respectively; machinery and equipment by 12% and 10%; and beverages and tobacco by 11% in 2010 and by 12% in 2011. One other industry, paper and paper products, is expected to post a double-digit gain in 2011, by 10%.

“The machinery and transportation equipment sectors are expected to be the strong performers, partially catalyzed by India’s current intensive effort to engage in much-needed infrastructure development,” economist Cliff Waldman wrote, “and after being flat in 2009, beverages and tobacco output is expected to resume the double-digit growth rate seen since 2004 as multinational beverage manufacturers continue to mine the Indian market.”

The report notes that over the short term, the Indian economy and its manufacturing sector will confront a number of challenges. While the country has diversified its export markets away from the advanced economies and toward developing Asia, almost one-third of Indian exports are still sold in the U.S. and the Eurozone, two regions with shaky and uncertain economic recoveries. In addition, India is confronting a difficult inflation problem, possibly forcing the central bank to accelerate monetary policy tightening. This creates a downside risk for economic and manufacturing growth, according to MAPI.