The fall in industrial production in November has not come as a big surprise to corporate leaders, but chief executive officers said the government needed to take urgent steps to bring industry back on track.
Industrial output fell 3.2 per cent in November, contracting by the sharpest margin in the past four years.
Industrial production by use shows capital goods contracted sharply and consumer goods also slowed down.
CEOs said one of the reasons for lower industrial production was declining private sector investment in the past two years. “We should wait for data to see whether the fall continues for a longer period.
The Chennai floods had an impact on many service industries as they were shut for eight days.
The automobile supply chain along with automobile manufacturing was also devastated, which has pulled down factory output,” said a Chennai-based CEO asking not to be named.
Global bank HSBC said the manufacturing purchase managers’ index for December suggested the effect of the Chennai floods would continue in December. “Overall, the manufacturing sector has gained from the oil bounty and the government capex in 2015, but as the incremental benefits fade, it will need to find support in other drivers,” said an executive with HSBC.
“This will result in corporate earnings of the December quarter falling significantly.
As for the investment climate, we are back to where we started two years ago, when a new government took charge,” said the CEO of a large company.
CEOs from the steel sector said much needed to be done to help the industry.
“All steel companies are bleeding. The government imposed a safeguard duty of 20 per cent and in the US it is 200 per cent. The steel industry needs a financial package before it is too late.
A memorandum from the Indian Steel Association has been submitted to the government,” said an executive with a Kolkata-based steel company asking not to be named.
Ravi Uppal, CEO of Jindal Steel & Power, said it was time for the government to help the steel industry as the fortunes of many other industries were dependent on it.
“Domestic steel players enjoy no incentives in financing, land acquisition and access to mineral resources.
Yet Indian producers show better conversion cost than global producers. However, it is not enough to make up for high power and logistics costs and high interest rates,” he said.
