Engineering sector fear muted growth in first half of 2013-14

Amid slow economic growth and tight financial conditions, engineering sector looks at muted growth in the business during first half of the current fiscal. While auto ancillary industry is believed to stay flat, industry expects some positive development to come from power equipment industry post second quarter of fiscal 2013-14.

Recent data from the ministry of commerce and industry showed that India's exports during 2012-13 have dropped by 1.76 per cent to US $ 300.6 billion (approx. Rs 16,20,000 crore) mainly on account of global slowdown and negative growth in engineering and textiles sector.

"Exports scenario is bad. Demand from Europe and the US have dropped significantly. In the domestic market also auto ancillary and power equipment sectors are dull. We do not see any major change till the next two of quarters," said Harish Rangwala, joint managing director, Harsha Engineering Ltd - an Ahmedabad-based bearing equipments maker.

The US and Europe together account for over 60 per cent of country's total engineering exports.

The industry is also eagerly awaiting monsoon forecast for the current year as a large share of engineering demand come from the rural market, which is dependent on monsoon. "Many parts of the country are faced with water shortage. In this situation, monsoon forecast plays a crucial role," said Rangwala.

"There have not been great reforms on the policy front. Also, interest rates continue to be high, thereby affecting demand. Till the next two quarters there is not much hope of revival in the situation," he said.

According to industry insiders, the demand from power equipment industry may revive soon as the recent order by the Central Electricity Regulatory Commission (CERC) on the imported coal and cost of power for the private power producers will have significant impact on the industry.

However, industry experts believe that the hike in power costs will result in a fall in consumption of power by industry, which will lead to surplus power. "The cost of power has to come down, only then the intermediate industry will be able to consume more power and produce more, thereby adding to the growth of the economy," said Jitendra Mamtora, chairman and managing director, Transformers and Rectifiers India Ltd.