Home >Industry >Manufacturing >Manufacturing expected to pick up activity in the second quarter

MUMBAI: Manufacturing sector activity is expected to pick up in the second quarter after core sector production begins to reach the levels of early March 2020, according to a study by Nexdigm, a business advisory firm.

The financial impetus provided to vaccine makers and emergency usage vaccines promise a bright future in terms of a fully vaccinated population, which will significantly contribute to higher levels of productivity, Nexdigm said.

During the second wave, the number of people working was much smaller as compared to those working during the first wave, which translated to slower economic recovery. However, with lockdowns slowly being reimposed, states allowed certain relaxations and permissions to keep the economic impact to a minimum.

However, small businesses and retailers bore the brunt of the initial impact of the second wave as they faced a liquidity crunch and stretched working capital. It is expected that once the second wave stabilizes, businesses will see 70% of pre-covid revenue.

India’s manufacturing sector contributes to approximately 16-17% of the GDP and provides employment to almost 20% of the country’s workforce. During the first wave, lockdown-imposed restrictions on the movement of goods and people severely impacted workforce capacity and disrupted supply chains, bringing nearly all manufacturing activity to a standstill.

The Index for Industrial Production (IIP) also fell to a negative growth of 9.6% indicating that core manufacturing activity also suffered setbacks resulting from the first and the second wave.

The complete lockdown and partial lockdowns had both demand-side and supply-side impacts on the manufacturing sector. On the supply side, the limited movement of goods, services, and personnel affected the production network.

The downturn in economic activity and the overall slowdown in production caused employment loss. These supply impacts were further compounded due to the demand-side facing issues such as reduced disposable income, savings, and increased uncertainties.

"Despite the ongoing second wave of the pandemic, India exhibited innovation in almost every field. It is important that the country expands on this to create a stable and viable ecosystem, as well as a structured mechanism for further investments in the manufacturing industry," the report added.

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