Investments keep hopes afloat amid economic gloom

On a low Industry takes steps to tide over downturn

Written by Ishfaq Naseem | Published: July 2, 2012 4:01 am

On a low Industry takes steps to tide over downturn

Slowdown has hit industrial output in Pune with companies not only putting recruitment on hold but also curtailing production. However,there is a silver lining with some companies still investing here.

General Electricals (GE) last month made one of the largest investments of over Rs 1,000 crore on its production facility at Chakan,indicating that the slowdown has not affected inflow of investment. Faurecia also invested Rs 110 crore to set up its R & D Centre in Bhosari MIDC area. Besides,Philips India set up a multi-million dollar facility at Chakan.

Voltality in currency market and poor performing stocks,driven by Eurozone crisis and low Gross Domestic Product (GDP) figures,have led to people exercising caution in expenditure.

Growth in the sectors like real estate is not picking up mainly due to slow project clearance and rising building material costs. IT sector,which should have benefited from the depreciation of rupee against the dollar — as major revenue of companies comes from US market — is facing ‘policy paralysis’ with markets making it difficult for firms to take steps towards expansion.

The auto component manufacturers have curtailed hiring of temporary staff after a drop in sales of cars and less than expected growth in the two-wheeler segment. They have even reduced the their raw material inventory and resorted to block-closures,the prime example being Tata Motors.

Deepak Karandikar,managing director of Praditi Pressparts,a small-scale auto component manufacturing unit,said this month,hiring of temporary workforce has been reduced by some 20 per cent.

K Srinivas,president (motorcycle) Bajaj Auto,said the industry growth in two-wheeler category was six per cent in the fourther quarter of last financial year.

Shirish Kulkarni,director of DSK Group,said the dip in the growth of sales of four-wheelers was because people were being cautious.

In the property segment,the demand is apparently there,but growth has stagnated over the last few years. Nitin Nyati,chairman and managing director of Nyati Group,said the bottlenecks were because of slow clearences and higher interest rates.

Members of Confederation of Real Estate Developers Association of India (CREDAI) said the growth in the property segment remained at 20 per cent over the last two years.

Arun Nathani,CEO and MD of Cybage Software,said the double digit “organic’’ growth in the IT sector should be seen as satisfactory. “A few years ago,the growth was 30-40 per cent,but given the current economic situation,the current growth should be seen as satisfactory. When I say organic growth,we have to exclude growth through mergers and acquistions.” He,however,said volatility of currency has made companies ‘conservative’ in terms of decision making.

Alex Mathews,head (research),Geojit BNP Paribas Financial Services Ltd,said the export demand from the Eurozone market has adversely impacted the IT companies. He added that early hedging would not have helped companies much from dollar apperciation.

Interestingly,even as the Reserve Bank of India (RBI) sees inflation to be high,the slowdown in demand,particularly in the auto sector,is preventing it from affecting cuts in the cash reserve ratio (CRR) or the repo rate as the industry was anticipating.

Jiji Mathew,assistant professor (macro-economics),National Institute of Bank Management (NIBM),said,“The real challenge is to not only lower inflation but also to ensure growth. The stimuli in some outside economies is fuelling inflation in our country. As the economic environment is not optimistic,little investment is coming in the form of Initial Public Offerings (IPOs) and market capitalisation of companies has taken a hit.”

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