As expected, industrial production across India hit rock bottom during the first quarter of 2020-21 financial year, thanks to the pandemic-induced lockdown. Just 10 per cent manufacturing units reported increase in production. But the more worrisome aspect is that the outlook for coming days remains bleak—according to a quarterly survey done by the industry chamber Ficci.
Despite industries being given concessions halfway through the lockdown and easing of restrictions via 'Unlock' from June 1, Ficci's survey shows that most companies are operating at low capacities, some as low as 28 per cent. The reason? Lack of demand.
As much as 85 per cent of companies say their order books show lesser orders. This, coupled with other factors like decrease in the workforce with many migrant workers yet to return and reluctance of management to invest more funds in these uncertain times combines into a lethal bad news for Indian economy. That this bad news is coming on the heels of a protracted slowdown in manufacturing since 2018 doesn't help matters one bit.
“Future investment outlook looks subdued as only 22 per cent respondents reported plans for capacity additions for the next six months,” says the Ficci report. This is perhaps the lowest percentage for a long, long time. The reasons given by top brass of various manufacturing firms range from high raw material prices, high cost of finance, uncertainty of demand, shortage of skilled labor and working capital, high logistics cost, low domestic and global demand due to imposition of lockdown across many countries, excess capacities due to high volume of cheap imports into India, lack of financial assistance, unstable market, complex procedures for obtaining environmental clearances, high power tariff etc.
In fact, from the many sectors that the chamber surveyed from auto to electronics and textiles, the only two segments of industry that grew during the lockdown period seemed to be medical devices and the metals sector.
The trends indicate that Unlock has not translated into an automatic 'back to business' scenario, with businesses grappling with issues ranging from the fall in demand to getting supply chains and work force back on track. Different sectors have been affected differently, with the automobile sector the worst off. With just 28 per cent of active operations, it joins the leather industry, similarly crippled at 34 per cent, at the bottom of the table.
The survey was conducted pan-India with over 300 companies both large and small spread, with a combined turnover of over Rs 2.5 lakh crore, across 12 pivotal sectors.
