India's Manufacturing Slowdown: Chief Economic Adviser Flags Global Grind, Import Dumping

The slump in India's economic growth, led by a sluggish manufacturing sector, has been a result of a global slowdown in manufacturing due to excess capacity and imports dumping, particularly from China, according to Chief Economic Adviser VA Nageswaran.

"The bulk of the slowdown has been due to manufacturing. Global slowdown in manufacturing due to excess capacity and imports dumping in India naturally slowed manufacturing down," Nageswaran said in a press briefing after the release of the country's second quarter economic data.

India's gross domestic product grew at the slowest pace in seven quarters at 5.4% in the July-September period. GDP was estimated to grow 6.5% in the second quarter, according to economists polled by Bloomberg.

Manufacturing rose by just 2.2%, compared to 7% in the first quarter and 14.3% in the year-ago period. 

Nageswaran said even though globally industrial activity has slowed, in India, the manufacturing PMI has remained above 50, which denotes expansion.

"Concern over higher imports from China has had an impact on Indian prices. Geopolitical risks and trade uncertainties amid the US election season were also factors. Consumption of steel went up, but production did not. Some of it may not continue at the same pace in the subsequent quarters," he said.

"The industry is generally improving when viewed from a long-term perspective. The services sector has experienced steady growth, while private consumption remains stable. Exports of goods and services are on an improving track. The majority of the slowdown in Q2, attributed to supply-side factors, is due to challenges in the manufacturing and mining sectors," the CEA further said.

The CEA noted relatively buoyant expansion in agriculture and construction sectors, which have grown 3.5% and 7.7%, respectively, and stressed the need to "double down" on deregulation and enhancing states' expenditure capacity.