The global economic slowdown has impacted the Indian manufacturing sector, which has cut output in the last few months and this trend is expected to continue in coming months, according to a survey by industry body Federation of Indian Chambers of Commerce and Industry (Ficci).
Ficci’s survey assessed the manufacturing performance (across sectors) in terms of key parameters like growth, exports, likely scenario in the coming months and employment, and it found that the manufacturing sector has slowed down in the last few months and this is likely to continue till March 2009, which might result in job losses.
While sectors like textiles, leather and metal sectors are expected to clock decline of 3.9 per cent, 13 per cent and 30 per cent, respectively, chemicals and machinery sectors will register an increase of 5 and 17 per cent, respectively, for the month of October 2008 (these figures are only indicative as they do not cover the entire sector), revealed the survey.
| DOWNWARD MARCH | ||
| Sector | Prodn growth (Oct ‘08 over Oct ‘07) | Planned prodn cut (Nov ’08 over Mar'09) |
| Textiles | -3.9 | 10-40 |
| Metal | -30 | 10-50 |
| Machinery | 5 | 40 |
| Chemical | 17 | 15-25 |
| Leather | -13 | 15-50 |
| Others | 6 to 30 | 10 |
About 200 companies, which included both large (with a turnover of over Rs 30,000 crore) and SMEs in each sector, were interviewed for this survey in the first week of December. These companies were from various sections like textiles, metal and metal products, machinery and equipment, leather and leather goods, chemicals, gems and jewellery, cement, among others.
The government on Sunday announced a fiscal stimulus package that included an across-the-board cut in excise duties by 4 per cent and an additional Rs 10,000 plan expenditure to boost domestic demand in the economy. A day earlier, the Reserve Bank of India (RBI) had reduced key interest rate by one percentage point, with an aim to bring down the overall interest rate to stimulate investment in the economy.
Manufacturers in some of the major sectors like textiles, metal and metal products, machinery and equipment, leather and chemicals have reportedly planned cuts in their productions ranging from 10-50 per cent between November 2008 and March 2009 due to fall in the demand in the wake of the global economic crisis. As a result, the growth of the manufacturing sector could further slow down in the coming months.
The survey also revealed that downsizing of employment in the range of 10-30 per cent is expected in leather and leather products sector, followed by metal and metal products, textiles and jewellery in next few months. Falling demand in the EU, the US, Japan and other developed countries and a steep increase in raw material prices in last few months along with liquidity crunch have, in some way, hindered the growth of the leather sector. Likewise, the primary reason for the slowdown in the metal sector is falling demand for heavy vehicles, which has reduced the demand for metals.
The Ficci survey also pointed out that exports of textiles, leather and metal products plunged sharply in October 2008 compared to the year-ago month. Textile exports are expected to decline by around 10 per cent in October 2008. However, leather exporters are likely feel the maximum impact as respondents reported that on an average their orders from abroad have declined by 62 per cent.
However, sectors like machinery and equipment, chemicals and products may not see any loss of employment in the current scenario because these sectors have despite slowdown have not posted a negative growth, according to a Ficci official.
