Economic Slowdown

Indian industry is on life support – and the government’s denial of this isn't helping

Multiple indicators, from factory output to low demand for bank credit, show that the manufacturing sector is in the doldrums.

Prime Minister Narendra Modi, riding to power on the promise of economic growth, launched his Make in India pet project in September 2014 to boost manufacturing and reduce dependence on imports.

The project aimed to create more jobs by enhancing India’s potential of becoming a manufacturing hub, specially for electronics, in the next three years.

Two years on, however, the results of the government’s push to industry have been lacklustre.

The numbers talk

In the last year, the index of industrial production – which measures the growth in various sectors such as mining, electricity and manufacturing by surveying data provided by companies – has declined steeply. As compared to 9.9% month-on-month growth in October 2015, there was a contraction of 0.7% in August (from July). This was the second consecutive decline in the index, which fell by 2.5% in July.

Though the representativeness of the index of industrial production has been questioned, a Mint report on Wednesday said that the April-August performance is the worst in a decade – something the government cannot afford to ignore.

Optimistic government

Despite these signs of a slowdown in industry, the commerce and finance ministries remain optimistic about India’s growth potential. They claim that the falling exports and slowing industry data are going to stabilise in the near-term.

“At the moment, the fall is arrested,” Commerce Minister Nirmala Sitharaman said on Monday after two consecutive months of falling exports. “We will only be looking at steady growth. It may be slow but steady.”

Before this, exports had declined for 17 consecutive months before picking up in June.

In September, Finance Minister Arun Jaitley insisted that the steel industry, reportedly the biggest contributor to non-performing assets of public-sector banks, was showing signs of a turnaround. The month before that, he said India had defied the global slowdown and seemed poised for high-growth on the back of services sector.

However, recent data – including that from the Reserve Bank of India – contradicts these statements.

The latest RBI data points to a slowdown in the manufacturing sector as its order books (where orders are registered) have declined year-on-year. A negative growth of 2.6% is projected for the last quarter of the 2016-'17 financial year from the last quarter of the previous fiscal year. In comparison, the 2015-'16 financial year had started on a high, with 10.2% growth in the first quarter of that year.

“The demand conditions in the Indian manufacturing sector continued to remain subdued, as can be reflected from the trajectory of capacity utilisation,” the RBI said in its monthly statement in September. “Overall, Indian manufacturing sector did not appear to witness any turnaround, as indicated by the survey results.”

Outlook grim

A closer look at the index of industrial production numbers for the manufacturing sector paints an even grimmer picture. The manufacturing index of industrial production has been declining steadily and saw a negative growth of 4.7% growth in the first quarter of financial year 2016-2017.

A report in the Indian Express on Wednesday said that bank credit or loans to the industrial sector had decreased by 0.2% year-on-year in August – slipping into negative for the first time in a decade.

An examination of the gross bank credit to the industry based on data from RBI’s September monthly review (in the chart above) showed that credit to sectors like textiles, construction, petroleum and beverages declined between 1-7% in the current financial year.

A massive 13.3% decrease in credit was recorded in the food processing industry, while chemicals, gems and vehicle industry received marginally more credit.

While Jaitley has repeatedly sought a reduction in interest rates to boost the Indian economy and new RBI Governor Urjit aPatel cut repo rates by 25 basis points earlier this month, economists do not think this will fix the manufacturing sector. The repo rate is the rate at which the RBI lends to banks. A lower repo rate increases banks’ access to credit and so should result in lower interest rates for customers.

“The demand in the economy over the last couple of years has come down to a level that capacity utilisations are at around 75%,” DK Pant, chief economist at India Ratings was quoted as saying by Indian Express. “In such a scenario, no investor will invest and I don’t think a cut in interest rate can fuel investment.”

No jobs

Another objective of the Make In India program was to create more jobs for the burgeoning labour market in India (by creating a thriving industry), but that has not happened yet either. The annual report by the Ministry of Labour and Employment showed that unemployment in India rose to a five-year-high at 5% in the 2015-'16, while the female unemployment rate was 8.7%.

“In the manufacturing sector, growth has come predominantly from improvement in efficiency and not too much due to a rise in output, so the growth in employment is much slower,” Proban Sen, former chairman, National Statistical Commission told the Hindu. "Second, the pattern of employment in the corporate sector is changing. Companies are looking to hire productive workers so there is a reduction in absorption of labour.”

All this points to a difficult time ahead for the Indian industry and the Modi government would do well to acknowledge the problem rather than arguing over numbers, as Dinesh Unnikrishnan summed up in this Firstpost article:

Clearly, there is no magic wand with finance minister Arun Jaitley to make the problems vanish in a moment. But, he could engage with the private sector more actively to put money on the table. Also, the public spending that acted as a major catalyst needs to continue with pace. Despite the hype over the Modi government’s investment focus, the fact remains that there has not been a substantial jump in private investment to support growth. The government needs to acknowledge the problem and see what can be done to crack it.

We welcome your comments at letters@scroll.in.
Sponsored Content BY 

What’s the difference between ‘a’ washing machine and a ‘great’ washing machine?

The right machine can save water, power consumption, time, energy and your clothes from damage.

In 2010, Hans Rosling, a Swedish statistician, convinced a room full of people that the washing machine was the greatest invention of the industrial revolution. In the TED talk delivered by him, he illuminates how the washing machine freed women from doing hours of labour intensive laundry, giving them the time to read books and eventually join the labour force. Rosling’s argument rings true even today as it is difficult to deny the significance of the washing machine in our everyday lives.

For many households, buying a washing machine is a sizable investment. Oddly, buyers underestimate the importance of the decision-making process while buying one and don’t research the purchase as much as they would for a television or refrigerator. Most buyers limit their buying criteria to type, size and price of the washing machine.

Visible technological advancements can be seen all around us, making it fair to expect a lot more from household appliances, especially washing machines. Here are a few features to expect and look out for before investing in a washing machine:

Cover your basics

Do you wash your towels every day? How frequently do you do your laundry? Are you okay with a bit of manual intervention during the wash cycle? These questions will help filter the basic type of washing machine you need. The semi-automatics require manual intervention to move clothes from the washing tub to the drying tub and are priced lower than a fully-automatic. A fully-automatic comes in two types: front load and top load. Front loading machines use less water by rotating the inner drum and using gravity to move the clothes through water.

Size matters

The size or the capacity of the machine is directly proportional to the consumption of electricity. The right machine capacity depends on the daily requirement of the household. For instance, for couples or individuals, a 6kg capacity would be adequate whereas a family of four might need an 8 kg or bigger capacity for their laundry needs. This is an important factor to consider since the wrong decision can consume an unnecessary amount of electricity.

Machine intelligence that helps save time

In situations when time works against you and your laundry, features of a well-designed washing machine can come to rescue. There are programmes for urgent laundry needs that provide clean laundry in a super quick 15 to 30 minutes’ cycle; a time delay feature that can assist you to start the laundry at a desired time etc. Many of these features dispel the notion that longer wash cycles mean cleaner clothes. In fact, some washing machines come with pre-activated wash cycles that offer shortest wash cycles across all programmes without compromising on cleanliness.

The green quotient

Despite the conveniences washing machines offer, many of them also consume a substantial amount of electricity and water. By paying close attention to performance features, it’s possible to find washing machines that use less water and energy. For example, there are machines which can adjust the levels of water used based on the size of the load. The reduced water usage, in turn, helps reduce the usage of electricity. Further, machines that promise a silent, no-vibration wash don’t just reduce noise – they are also more efficient as they are designed to work with less friction, thus reducing the energy consumed.

Customisable washing modes

Crushed dresses, out-of-shape shirts and shrunken sweaters are stuff of laundry nightmares. Most of us would rather take out the time to hand wash our expensive items of clothing rather than trusting the washing machine. To get the dirt out of clothes, washing machines use speed to first agitate the clothes and spin the water out of them, a process that takes a toll on the fabric. Fortunately, advanced machines come equipped with washing modes that control speed and water temperature depending on the fabric. While jeans and towels can endure a high-speed tumble and spin action, delicate fabrics like silk need a gentler wash at low speeds. Some machines also have a monsoon mode. This is an India specific mode that gives clothes a hot rinse and spin to reduce drying time during monsoons. A super clean mode will use hot water to clean the clothes deeply.

Washing machines have come a long way, from a wooden drum powered by motor to high-tech machines that come equipped with automatic washing modes. Bosch washing machines include all the above-mentioned features and provide damage free laundry in an energy efficient way. With 32 different washing modes, Bosch washing machines can create custom wash cycles for different types of laundry, be it lightly soiled linens, or stained woollens. The ActiveWater feature in Bosch washing machines senses the laundry load and optimises the usage of water and electricity. Its EcoSilentDrive motor draws energy from a permanent magnet, thereby saving energy and giving a silent wash. The fear of expensive clothes being wringed to shapelessness in a washing machine is a common one. The video below explains how Bosch’s unique VarioDrumTM technology achieves damage free laundry.

Play

To start your search for the perfect washing machine, see here.

This article was produced by the Scroll marketing team on behalf of Bosch and not by the Scroll editorial team.