Testing times are ahead for the Indian industry, in particular the SMEs, which will have to wait a little longer for the economic climate to look up
The Indian industry, including the SMEs, which were hoping for a recovery in the industrial production and export market this quarter, will have to wait a while longer.
Reeling under the economic lull, India’s industrial sector has continued to register negative growth since the first quarter of the last financial year.
Moreover, with no signs of improvement in the export market, economists and industry analysts anticipate the industrial outlook to remain negative even during the first half of the current financial year.
Biggest monthly contraction in Feb 09
Despite the twin stimulus packages and several initiatives undertaken by the government to boost the manufacturing sector, industrial production saw its biggest monthly contraction, since April 1993, in February 2009. India’s industrial output shrunk by 1.2% during the periodowing to a weak market demand and poor performance by the export sector during the month.
SMEs engaged in the manufacturing of basic, intermediate and consumer goods also registered plummeting margins. Nitin Maheshwari, Proprietor, Ambika Synthetic Mills, says, “The steep fall in demand and contraction of external orders in the international markets made it extremely difficult for small-sized manufacturers to maintain our output levels.”
Moreover, the worsening credit squeeze has compelled industrial units to revamp their production schedule and lay-off workers. Sunita Agarwal, Proprietor, Arihant Exports, a leading textile supplier in Kolkata says, “We have witnessed nearly 20% fall in our revenue growth as compared to the last year’s figure. Dwindling export orders and thinning margins have left us with no option but to cut down production.”
Going by the prevailing economic scenario, complete market recovery seems unlikely during the coming quarters. In addition, as per Moody’s forecasts, the industrial outlook is anticipated to remain gloomy until the export sector gains momentum. Given that exports are unlikely to recover any time soon, a revival in industrial production during this quarter also seems improbable.
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