Production of electrical equipment — cables, switchgears, transformers and other conductor equipment — fell in the October-December quarter. This was mainly due to inventory pile-up, credit squeeze and uncertainty over future demand in a recessionary environment.
Data released by the Indian Electrical and Electronics Manufacturers Association (IEEMA) show production was down by 1.76 per cent during the period — the first contraction in five years — against growth of 11.8 per cent in the corresponding quarter last year (2007-08).
Consolidated growth for the nine months of 2008-09 declined sharply to 4.9 per cent, from 8.98 per cent in the first half of the year. The electrical industry had grown 6.6 per cent in the previous quarter and by 11.8 per cent in the first two quarters. Against this, the industry had grown by 14.5 per cent and 24.55 per cent, respectively, in the corresponding quarters of 2007-08.
IEEMA tracks the actual volume sales of its members, who generated an estimated Rs 46,000 crore turnover in 2007-08. Sales of these manufacturers are mainly powered by government financed programmes 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 uncertainty of future financial positions,” said IEEMA sources.
The trend goes against the accepted assumption that power infrastructure projects are unlikely to be affected by the economic slowdown.
IEEMA sources say industry fears tough times ahead. There will be a freeze on policy by the government for the next four months, limited credit availability, decline in export orders and growing imports, coupled with the fear of dumping of low-voltage products. A further slowing in industrial investment and a crash in the real estate sector could cause a further fall in demand, they said.
Analysts with IEEMA said demand for almost all product sectors has been in the red, except for HT motors, power cables, transformers, circuit brakers and conductors.
While capacitors posted a negative growth of 16.5 per cent, so did energy meters (-21 per cent), rotating machines (-11.8 per cent), cables (-2.4 per cent) and switchgears (-1.9 per cent).