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Why is Revival Becoming Difficult for Manufacturers?

Companies dealing in essential items have achieved stabilization while some manufacturing units that are dealing in non-essential items are showing signs of wrecking
BY Jaspreet Kaur
Feature Writer, BusinessEx
Sep 11,2020

In Unlock 4.0, the government has permitted reopening of malls, academic institutions and public transport. The move presumes to bring a bit of normality in the economy and a return to the traditional way of socialising, as well as living, for the general masses. However, the Indian business ecosystem is still waiting for the market to lift up.

Companies dealing in essential items have stabilized themselves in the current adversity. While organisations selling non-essential items are grappling for survival. Manufacturing units of the country are showing signs of wrecking caused by the pandemic. On one hand, a surge has been witnessed in the production of food products, basic metal, and intermediate goods while, on the other hand, the production of clothing, handicrafts, footwear and other allied items  have dramatically decreased. 

Unprepared for Pandemic-led Downturn 

The last recession in 2008-09 had disrupted the market similar to the current one. However, it was foreseeable by a handful of companies, who sustained it and came out as winners. The present adversity is an abrupt event for many. 

Companies that are basically serving low cost products and focusing on middle class consumers faced a hard hit. 

"We have 54 stores under PAN India in multi brand outlets (MBO). Gradually, sales were increasing until March 2020 when all stores were locked down. The company had to bear losses as it was bringing leather shoes that were meeting international standards with high fashion brands. We are unable to finance the business and thus, got loans from various banks, NBFCs, and other institutions. We are debt-laden and during this time, we are exploited by various people including landlords, vendors, and suppliers," Nipur Mishra, who owns a manufacturing unit in Noida, told BusinessEx.  

The company works along with artisans in manufacturing handmade leather shoes. After being struck by the pandemic, the company had to close down its factory, ceased taking orders, and laid off its workforce.

Changing the Focus 

In the epidemic, demand for some commodities has immensely decreased while sales of essentials have skyrocketed. Manufacturers are therefore shifting their focus on commodities that can serve as an essential item, in turn, increasing their profits and chances of survival in the crisis. By changing the focus, new marketing plans are also coming up in the system. 

"We are now only focusing on apparels, bags and footwear. The present crisis is much worse than the last economic downturn in 2008. The company had marketing growth plans for this year. However, considering the social distancing policy, it has organised virtual trade shows by complying with IT resources," Leo Shastri, Director for Operations and Strategy at Usha Exim, told BusinessEx.  

Even though, the company embraced virtualisation, it has to deal with aftermath of virtual adoption, that is, increase in sampling cost. 

Digitisation is not a Possible Solution 

Over the last few months, digitisation was widely proclaimed as a solution for carrying out business throughout the present crisis. However, there are companies that fail to run their business digitally even after registering to the e-commerce platforms. Return to base was considered to be the primary reason for some firms for not adopting digitisation. 

"The irony of the situation is that if the company goes online and sells through online marketplaces then the return to base is up to 60 per cent and 70 per cent. In India, many people do not know about their actual shoe size. Whether it is garment or shoe, the return to  base is really high and the current market is for the economic section," Mishra disclosed obstacles in digitisation process. 

A Positive Growth of the Indian Manufacturing Sector 

While small manufacturers are suffering badly, the Gross Value Added (GVA) at basic current prices from the manufacturing sector in India grew at a CAGR of 5 per cent during FY16 and FY20 as per the annual national income published by Government of India. The sector's GVA at current prices was estimated at $397.14 billion in FY20 PE, as reported by the IBEF. 

The manufacturing component of IIP stood at 129.8 during the fiscal 2020. A surge has been registered in the production of basic metals (10.8 per cent), intermediate goods (8.8 per cent), food products (2.7 per cent) and tobacco products (2.9 per cent). The country's index of eight core industries stood at 131.9 in the fiscal 2020. While Merchandise export decreased 4.78 per cent year-on-year to reach $314.31 billion

When the market is lopsided, flowing cash into the economy would not simply create a balance. Attention should be paid in creating demands naturally and thereby, initiatives should be carried to embrace as well as promote Indian products.

 

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