Tuesday, 28 February 2017
India's manufacturing falls by 3.7%; micro, small industries suffer 35% job loss, revenue dips by 50%: Report
By Our Representative
A top data site has revealed that sales of manufactured goods fell 3.7% during 2015-16 – the first decline in seven years – sparking fears of layoffs in the coming months. In a major expose, quoting Reserve Bank of India (RBI) figures, the site says, “The sales of manufactured goods were falling even before demonetisation, affecting sectors ranging from textiles to leather to steel.”
Pointing out that this has happened despite the “the government’s efforts to attract investment under its Make-in-India campaign”, the report in the site says, the result of the slowdown is, in the six months to September 2016, “engineering major Larsen & Toubro laid off some 14,000 employees”, and companies like Microsoft, IBM and Nokia reportedly “cut back on their workforce in 2016 – albeit on a smaller scale – blaming sluggish demand for downsizing.”
“In November 2014, just weeks after Prime Minister Narendra Modi launched his Make-in-India campaign, Nokia shut its factory in Chennai, rendering 6,600 full-time workers jobless”, the report, written by Prathamesh Mulye, a journalist with 101Reporters.com, a pan-India network of grassroots reporters, points out. The manufacturing sector constitutes 15-16% of the gross domestic product (GDP) and supports 12% of the workforce.
“A range of factors including falling investment, increased input costs and higher import duties have caused demand for manufactured goods to fall, a trend that was visible before demonetisation and has strengthened since”, the report says, though adding, in 2015-16, “The services sector grew by 4.9%, faster than the 3.7% recorded in the previous financial year.”
“Manufacturing”, on the other hand, “contracted for the first time in seven years, from a growth rate of 12.9% in 2009-10 to -3.7% in 2015-16”, the report says, adding, “Small-scale private companies, with yearly annual sales of less than Rs 100 crore, have been more seriously affected as their sales have contracted continuously for the last seven years.”
“Having registered an 8.8% decline in 2009-10, their sales fell by 19.2% year-on-year in 2015-16”, the report says, quoting a textile manufacturing plant owner from Bhiwandi, 32 km northeast of Mumbai, as saying, while the cost of final product has increased, “we are unable to compete with cheaper imported Chinese products.”
A Mumbai-based small-scale gold jewellery manufacturer is quoted as saying that “higher export duty and decline in demand has led to reduction in sales even before demonetisation,” adding, “We were forced to reduce production. So, hiring of workers on contractual basis has also gone down.”
Quoting from a new RBI study, the report says, “Investment has fallen because of a decline in demand, leading to lower sales and profits. New orders recorded a decline sequentially (quarter-on-quarter) as well as on a year-on-year basis and dipped into negative territory.”
“Closure of 186 industrial units led to net job losses of 12,176 in the manufacturing sector over the last four years”, the report says, adding, post-demonetisation, there is “cash crunch” leading to fall in sales as well as a shortage of workers due to mass exodus from cities.
Further quoting from a All India Manufacturer’s Organisation study, the report says, “In the first 34 days of demonetisation, micro- and small-scale industries have suffered job losses of 35% and a 50% dip in revenue.”
“A cutdown in industrial output for the fourth straight month in December, along with a depressed investment outlook, could lead to more layoffs”, warns the report quoting industry sources.
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