Industrial output for June was published recently and it has been the fourth consecutive month showing an overall decline. According to data released by the central government - seven out of the eight core sector industries, namely, coal, crude oil, natural gas, refinery products, steel, cement and electricity have dropped by 15.5%, 6%, 12%, 8.9%, 33.8%, 6.9%, and 11%, respectively. Only the production of fertilisers grew by 4.2% in June but was slower than the 7.5% growth recorded in May. These eight industries account for 40.27% in the Index of Industrial Production (IIP). In the April-June quarter of FY 2020-21, the overall industrial sector’s output also dropped by 24.6%.
Though the year-on-year (Y-o-Y) growth rate of the industrial sector has contracted in June (15%), the rate of contraction has improved as compared to May (22%) - owing to the relaxation of the nationwide lockdown.
Tanmoyee Banerjee, Professor, Department of Economics, Jadavpur University, told BE, “A policy balance is required to fight with the pandemic along with saving the lives and livelihood of millions of Indian people. To boost up the growth rate of core industries, various supply side and demand side policies are required. Government investment in the infrastructure sector is the need of the hour to boost demand.”
A major manufacturing sector like the automobile sector has also experienced a drastic slip. The Society of Indian Automobile Manufacturers (SIAM) in its official site on July 14 has informed that the auto industry has declined by 75% during the first quarter of FY 2020-21 as compared to the same period last year. The total production of passenger vehicles, three wheelers, two wheelers and quadricycles observed a decline of 79.39% in April-June 2020. Showing a sign of hope, in the month of June 2020, this segment witnessed de-growth of 51.44%, which is better than the two previous months.
BE tried to communicate with the All India Manufacturers’ Organisation (AIMO) but the organisation could not be reached. However, the organisation had previously stated, “Over 60-odd million MSMEs are in real danger due to market issues with over 92% drop in domestic sales compared to the same time last year.” They had also made a plea to the government for support packages.
Mobile manufacturing segment giving hope
India’s policy focus on the local and global perspective is expected to give the country better manufacturing opportunities. With the flow of FDI, India is welcoming a number of mobile manufacturing companies. Brands like Apple will start to manufacture mobiles in Chennai in near future.
Ravi Shankar Prasad, Minister, Ministry of Electronics and Information Technology’s (MeitY), Government of India, recently stated that Samsung, Rising Star and three Apple contract manufacturers namely Foxconn, Wistron and Pegatron have applied for largescale electronics manufacturing rights in India under a $6.5 billion incentive scheme. These companies are soon to be benefitted by the Ministry’s Production Linked Incentive (PLI) scheme for making mobile phones and few other electronic items like transistors, diodes, thyristors, resistors, capacitors and nano-electronic components such as micro electromechanical systems. As around two-dozen domestic and foreign companies have applied for the PLI scheme, it will also aid the country’s employment scenario by generating 300,000 direct and nine lakh indirect jobs. India’s digital shift will help to push the demand of these products and augment domestic manufacturing opportunities.
MSMEs and Unlock 3.0
As of July 4, `1.14 lakh crore was sanctioned by private and public sector banks under the 100% Emergency Credit Line Guarantee Scheme. But the actual disbursement is approximately `56,091 crore. Banks should be open to lending more loans to the crucial industrial sector. The MSME sector is still waiting for supportive funding. Relaxations for the sector during Unlock 3.0 are needed to boost the production system of the sector. With increasing economic and industrial activities in the upcoming two quarters, the sector’s ability to repay loans and EMIs will also grow.
Professor Banerjee added, “Along with that, industries should be granted moratorium on payment of interest and repayment of loans without any penalty. Industries should be granted subsidies on railway freights and other incidental charges. Given the huge displacement and retrenchment faced by the labour force, additional policies need to be directed to improve their condition. Since the daily infection rate of coronavirus is going up steadily, separate safety measures must be implemented.”