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COVID-19: Industrial Productions Takes a Hit, Government Data Indicates 16.6% Decline for June

Manufacturing is the production of products for use or sale

Industrial production declined by 16.6% in June, mainly due to lower output of manufacturing, mining and power generation, as per the government data released on Tuesday.

 

According to the Index of Industrial Production (IIP) data, manufacturing sector production registered a decline of 17.1%, while the output of mining and power fell 19.8% and 10%, respectively.

The data further revealed that the contraction in the consumer durables and capital goods segment was 35.5%and 36.9 %, respectively during June 2020.

However, the consumer non-durables segment posted a growth of 14%

In view of the preventive measures and announcement of a nationwide lockdown by the government to contain the spread of COVID-19 pandemic, a large number of industrial sector establishments were not operating from March-end, 2020 onwards.

COVID-19 and the Indian manufacturing industry- impact and recovery

The COVID-19 pandemic hit manufacturers in an unprecedented and unexpected way. It is the first time in contemporary manufacturing records that the pandemic has influenced demand, supply, and workforce availability at the same time globally.

The ongoing lockdown has put a lot of pressure on the manufacturing industry to increase their sales, which contributes almost 20% of the GDP. Of this, 50% is contributed by the automotive industry. Thus, the automotive industry plays a vital role in the growth of the economy. But the coronavirus has shaken this auto industry very badly.

The Manufacturing Industry has been hitting in many ways due to the Corona effect!

Manufacturing is the production of products for use or sale

The manufacturing industries play a crucial role in economic development because it provides jobs to many people but the pandemic has shaken this industry.

Due to lockdown, bike, scooter, and car manufacturers had to Shut down their factories for weeks. Their workforce which is mostly migrants went back to their homes due to not having any work as factories had to close in this pandemic.

 Every major manufacturer is now experiencing break-down due to their supply chains of parts and raw materials, driven by what may now become recurring volatility of supply from South Asia.

The workforce doesn’t want to come back on the work from their places because of the fear that the government might be imposed lockdown again, without informing.

Without the workforce, many manufacturing industries are not able to restart their factories and companies. Millions of daily-wage workers who have left cities are creating a labour shortage.

The abruptness and the pervasiveness of this pandemic have created a storm for manufacturing industries. The bottom has fallen out of market demand globally, while supply chains are being disrupted worldwide. The reason is people have no money to buy any goods or services as everyone has been sitting at home for 3 months and another reason is their businesses are shut down in the lockdown. Whatever the money they have in liquid form, they are spending on buying essential goods. This is the main barrier in front of the manufacturing industries. 

To raise demand is the most difficult challenge for manufacturers in post lockdown.

Road to recovery

visual representation of Road-to-Recovery

Supply chain material disruptions have occurred, as several states in India are under lockdowns with intermittent relaxations in place.

Several manufacturers in automotive and mobile phone space have indicated that they have restarted or in the process of restarting their respective operations in India.

Manufacturing is still the most opportune segment in terms of IT investments as we head toward the rebuilding and revamping stage with a focus on centralized decision making and process automation along with technologies such as cloud, Internet of Things (IoT), big data and analytics (BDA), artificial intelligence (AI), and cybersecurity that are pivotal to enabling value chain visibility

Those companies which have been operating with excellent operational parameters, like, high quality, high productivity, well-trained workmen, well-maintained machines, etc., will take-off faster than the others. Thus, for well-managed companies, the period after lockdown could be an opportunity, while, for others, it could be an uphill struggle. During the shutdown period, excellent companies will develop recovery plans, while the average ones will develop survival plans.

Mining industry impact and response

Mining is the extraction of valuable minerals or other geological materials from the Earth

The COVID-19 pandemic has had a sudden effect on the worldwide economy and that impact goes across all industries, including mining. Some players in the mining industry will be more vulnerable to the pandemic than others.

Mining companies in India are among those being hit by weakened demand as the COVID-19 pandemic impacts the global economy. Organizations and companies limit access to offices, mine sites and manufacturing facilities, and restrictions on transportation and shipping increase because the pandemic has affected the entire value chain.

Further, Odisha, one of the nation’s major mining states with reserves of and production in important minerals such as iron ore, manganese ore, chrome ore, bauxite and coal, imposed lockdown in the entire State on 24.03.2020 due to COVID-19.

Government’s response to fight the situation 

The Ministry of Coal released a press release on 28.03.2020, in order to combat the situation which has arisen due to lockdown. To ensure that critical coal supplies are maintained during the lockdown period due to COVID 19 pandemic Coal supplies are declared as an Essential service and the officials of the Ministry of Coal are directed to work harder so that power and other critical sectors are unaffected due to the current situation. Coal stocks at power plants stand at 41.8 MT equivalent to 24 days consumption, according to the Coal Ministry. In order to ensure the easy and adequate availability of coal to every coal-dependent industry/Power Sector various steps have been taken as of 26 March 2020.

The industry showed signs of improvement after the measures taken by the Govt

In a press release, the Ministry of Statistics and Programme Implementation issued a disclaimer saying that “it may not be appropriate to compare the IIP in the post-pandemic months with the IIP for months preceding the COVID-19 pandemic”.

However, on a monthly basis, the Index of Industrial Production has shown improvement. The index, which was 53.6 in April, improved to 89.5 in May and 107.8 in June, the data revealed. The IIP had expanded by 1.3% year-on-year in June 2019

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