Production of electrical equipments - cables, switchgears, transformers and other power conductor equipment -- contracted in the October-December quarter mainly due to inventory pile-up, credit squeeze and uncertainity over future demand in a recessionary business environment.
According to data released by the Indian Electrical and Electronics Manufacturers Association (IEEMA), production by electrical industry contracted by 1.76 per cent during the period -- the first contraction in five years -- against a growth of 11.80 per cent in the corresponding quarter last year (2007-08).
Consolidated growth for the nine months of 2008-09 declined sharply to 4.93 per cent from 8.98 per cent in the first half of the year.
Electrical industry had grown 6.6 per cent in the previous quarter and 11.8 per cent in the first two quarters. As against this, the industry had grown 14.53 per cent and 24.55 per cent in the corresponding quarter in 2007-08.
IEEMA tracks the actual volume sales of its members, who generated an estimated Rs46,000 crore turnover in 2007-08. Sales of these manufacturers are mainly powered by Government financed programme for power generation capacity addition and associated transmission network.
"The fall indicates halt in procurement by industry and consumers as well as by the power distribution companies due to credit squeeze and uncertainity of future financial positions," said IEEMA sources.
The trend goes against the accepted assumption that power infrastructure projects are unlikely to be affected by economic slowdown.
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They said industry feared tough times ahead, due to freeze on the policy front by Government for next four months, limited credit availability, decline in export orders and growing imports coupled with fear of dumping of low voltage products. A further slowdown in industrial investments and crash of real estate sector could cause further fall in demand, they said.
Analysts with IEEMA said demand for almost all product sectors has been in red, except HT motors, power cables, transformers, circuit brakers and conductors. While capacitors posted a negative growth of 16.5 per cent, energy metres (-21.14 per cent), rotating machines(-11.77 per cent), cables(-2.40 per cent) and switchgears(-1.92 per cent) also posted negative growth.