India’s manufacturing industries pin hope on a speedy recovery – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/company/corporate-trends/indias-manufacturing-industries-pin-hope-on-a-speedy-recovery/articleshow/82346948.cms

SynopsisThere is still uncertainty on the demand front, and manufacturers are also hit by a shortage of raw material, restrictions on movements, diversion of industrial oxygen for medical use and infection among their own workforce. But companies haven’t yet cut their targets, hoping for a faster demand revival than that after the nationwide lockdown last year.

India’s manufacturing industries see an “immediate threat” but no lasting damage from the second wave of the pandemic, and expect pent-up demand to return immediately when the situation improves and offset much of the impact on business.

There is still uncertainty on the demand front, and manufacturers are also hit by a shortage of raw material, restrictions on movements, diversion of industrial oxygen for medical use and infection among their own workforce. But companies haven’t yet cut their targets, hoping for a faster demand revival than that after the nationwide lockdown last year. They also expect the impact on business to be less with lockdowns so far being limited to certain states and cities.

“The second wave is threatening a short-term disruption to recovery. Pent-up demand is expected to return as vaccinations pick up pace by June,” said RC Bhargava, chairman of Maruti Suzuki. “We see no falling demand as yet, only a few state-specific supply chain disruptions.”

2.0

The nation’s largest car maker, advanced the start of its maintenance shutdown by a month to this Saturday. Maruti said this would help divert oxygen used by the company and its component suppliers for medical use.

But Bhargava’s comment suggests that the impact would be minimal — at least as per the current estimates — to the manufacturing industries that contribute nearly 20% to India’s gross domestic product, and particularly to the auto industry that accounts for about half the manufacturing GDP.

India’s manufacturing industries had taken a severe hit during the shutdown last year and its immediate aftermath, but the recovery too was fast in key sectors like automobile, steel, cement and mining, and they were struggling to cope with pent-up demand when the second pandemic wave struck.

SHORT-TERM IMPACT
The learnings from last year should help manufacturers handle the current situation better, say experts. They are also pinning hopes on vaccination.

“This second wave is likely to result in a short-term growth bump to what is otherwise an uptrend. Manufacturing companies continue to overhaul their supply and sales chains to become more resilient to the second wave,” a Nomura Securities report said.

“The industry’s focus now is on doing whatever it takes to get the second wave of infections under control. Any short-term impact on the economy will be far outweighed by the benefit of getting the economy back on track as quickly as possible,” Confederation of Indian Industry president Uday Kotak said. “We are confident that as the rising infection curve is brought down, industry will bounce back to its earlier growth path. It is therefore imperative to now work with the government to bring the situation under control and get on to a massive vaccination drive.”

Meanwhile, automakers have asked component suppliers to build their inventory, as they feel the current disruption would be temporary and that the bounce back would happen faster this time.

COMPANIES CAUTIOUS
A few automakers are cautious and are shutting plants temporarily or having fewer shifts and working at a lower capacity.

MG Motor, the maker of the Hector SUV, has decided to shut its Gujarat plant for a week. Two-wheeler market leader Hero MotoCorp and nearest rival Honda Motorcycle & Scooter have temporarily shut operators, while Toyota Kirloskar has stopped production at factories in Karnataka from April 26 to May 14.

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