subject: Manufacturers Insurance [print this page] Manufacturers insurance premiums might be coming down shortly in India as the country's industrial output growth slows to a 15-month low. Capital goods output shrank during the month.
Although the correlation between manufacturers insurance premiums and factory output is not a precise science, there is likely to be a knock-on effect in the Indian insurance industry.
Disregarding the manufacturing insurance effect, the output growth figures showed growth of just 5.6% year-on-year in August, which is the slowest rate for some 15 months. Capital goods output dropped dramatically during the month. The 5.6% compares against the 15.2% increase in July.
Output of heavy capital goods which includes cabling and heavy machinery dropped to 2.6% during the month of August, against a massive growth of 72% in July. Manufacturer insurance rates are likely to fluctuate given the rapid rise and fall in figures, which has led to a volatility in the sector which has caused some to question the merit of the figures.
One Indian chief economist was quoted as saying:
"It's difficult to extract a trend out of this volatile component, particularly when it's driving the headline number to sharp swings. Last month there were just two or three items which drove growth, like insulated cables and wires, which grew 700%. think either the weightings need to be re-examined or the data collection needs to improve."
Analysts in India had forecast a slight slowdown at nearly 10%, but were shocked to see the figure come in at nearly half that.
The implications of slower growth in India will be felt throughout the globe. India is one of the recognised BRIC group of emerging economies which will help lead the world out of financial stagnation. The other countries in the BRIC grouping are Brazil, Russia and China. Although these countries are strictly speaking emerged', rather than emerging, they are not as well developed as other world economies, with some way to go before they can be labelled mature.
What worries Western economists is to avoid the feared double-dip recession in the US and UK, recovery should be led by export growth to those economies which are still growing. Ironically, growth figures of nearly 6% would be staggering in the US and UK, but with India slowing down and China also reporting slower growth, the West may not feel able to rely on sustained export growth in the emerging markets.
And the worry for the governments across both sides of the Pond, is that slower exports, a reduction in quantitative easing and necessary austerity cuts, adds up to a tricky formula. In the case of the UK, the good news is that the private sector is feeling more robust than last year, leading to the conclusion that there may be a strong recovery afterall.
And this will be good news for the manufacturers insurance sector as well.
Manufacturers Insurance
By: Hitanshi Joshi
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