The Indian foundry industry may have had a delayed reaction to the recession, but the pinch, when it came, cost 1.5 lakh jobs. Soon, the 7.8-million tonne per annum industry was among the worst-hit sectors. ?In September 2008, when the global economy started collapsing, we were not directly affected in exports of casting, primarily because the projects going on in the Middle East and Europe rolled on till December. The first time we felt the effect was in January 2009, when the repeat orders did not come in and customers in the US used the downturn and winter as an excuse not to buy,? says Ravi Sehgal, who heads Kolkata-based Carnation Industries Ltd and is also the Chairman of the Engineering Export Promotion Council (eastern region).
He adds, ?Between January and April most of our production for the US and the European markets, including shipments, are based on their plans for the first half of the year. But the only orders that we got this year were of small items to match their inventory. The big contracts just dried up.?
The situation got so bad that it forced several shutdowns. Says Sehgal, ?From January to April my unit and several others were virtually dead, and many of us had to shut down our facilities. I had to shut down one of my three units. In fact, in 2007-08 we were getting such huge orders that our capacity couldn?t match the demand. We had two units then, one in Belgachia and another in Liluah, and we were looking at a new grey iron plant in Uluberia. We aimed to get it started by October 2009, but when we saw the downturn, we were forced to go slow.?
Hope came from enormous cuts in interest rates by the RBI, coupled with the government?s stimulus packages, which helped the manufacturing sector pick up pace. The importance of the domestic market, which makes up for a large part of the Indian economy, was duly stressed, unlike export-oriented China. When China closed down many of its units for the Olympics, buyers had to look at the Indian foundry industry and this came as an opportunity to fill in the vacuum.
Also, Europe no more wanted to depend entirely on China and started to look at India as a new market. Another thing that happened after July-August 2009 was the $800-million package that the Obama government announced, which was mostly for federal projects given the ?buy American? order. So the American foundries entirely went to supply the federal projects and couldn?t supply to provincial and private projects. These projects then started depending on Indian imports, which also helped the export-oriented Indian foundry units to sustain operations. Sehgal says though the UK is a closed market now, the Olympics will ask for creation of fresh infrastructure, which is another cause for hope for the Indian foundry industry. Economists also believe a boost in the domestic demand will reverse the trend of the economic downturn. To India?s benefit, it also has an extremely successful software services industry, which can lend support to boost competitiveness of Indian enterprises.
The situation was mirrored across other manufacturing sectors in India. The Indian manufacturing sector, which accounts for 80% of the Indian industrial output, is commonly used as the barometer for measuring the growth of the Indian economy. Since March 2009 onwards, Indian manufacturing started reporting good numbers and the latest Index of Industrial Production (IIP) data revealed that India?s manufacturing sector grew by a robust 9.3%.
Manufacturers across India from diverse sectors such as chemicals, automotive components, textiles, chemicals, drugs and electrical products have become optimistic that there will be demands from global and domestic companies, though India?s manufacturing sector has to go a long way in terms of infrastructure and technology utilisation to be competitive. The cumulative growth for the period April-October 2009-10 was 7.1% in comparison to 4.3% in the corresponding period in the previous year. Manufacturing growth, which had fallen by 0.6% in October 2008, rose by 11.1% during October this year. Growth in mining and electricity increased to 8.2% and 4.7%, respectively, from a growth rate of 3.2% and 4.4% during the corresponding period in 2008-09.
Production of consumer durables rose 21% during October, while the increase in consumer non-durables also accelerated to 8.1% in the same month. Production of consumer durables and non-durables had declined by 1.6% and 0.6% during the corresponding month of October in 2008. The Purchasing Managers? Index, based on the survey of Indian 500 companies, which had declined to 44.4 in December, rose from 53.3 in April to 55.7 in May. New orders index rose from 54.9 in April to 59.1 in May, resulting in a thrust in the manufacturing index.
?A lot of export-oriented units like ours have started looking at the domestic market and changing their product mix. Carnation has started developing some items that it can supply to the heavy vehicle industry,? Sehgal says, adding, ?We used the slowdown to improve our technology and tried to gain higher efficiency standards. There are commitments of growth and investments and this time we will be in a better position to do business.?