Growth of the Indian electrical equipment industry has sharply decelerated to 0.6% in the third quarter (Q3) of the current financial year, 2011-2012, after growing at 13.8% and 3.6% in Q1 and Q2 respectively.
In the first nine months of the current fiscal, April-December, cumulative growth has been only 4.41%. The growth represents an absolute increase in output over similar period of last financial year and may differ from the growth in value terms, according to the Indian Electrical and Electronics Manufacturers’ Association (IEEMA). IEEMA, the apex Indian industry association of manufacturers of electrical, industrial electronics and allied equipment, has based these growth figures, after rigorous analysis, on the production and sales data (in volume / quantity terms) collected from its member organisations, which represent 95% of the entire sector.
Data clearly indicates that the slowdown in the industry is getting intensified, with each successive quarter showing an even lower growth than the previous quarter. This indicates that the second half of the current financial year will show much lower growth as compared to the first half, and this will translate into one of the lowest annual growths witnessed by the sector in recent years.
The adverse domestic economic situation due to high inflation, high interest costs, credit squeeze etc. is having a significant adverse effect on the bottom line of the industry; apart from intense overseas competition in the domestic market which is impacting the top line negatively.
Growth in the transformers, switchgear and rotating machines sectors in Q3 has turned negative, implying distinct slowdown in industrial capex activities and slowdown in off-take by users due to credit squeeze, high interest costs, etc. Imports continue to rise for 765 kV transformers and reactors (mostly through project imports), insulators, LV switchgear and HV cables. There has been some improvement in Q3 in production of transmission line towers, conductors, power cables and energy meters as supply has improved to major PSUs and power utilities.
The slowdown in the power sector and the escalating imports of electrical equipment is significantly impacting the commercial viability of the industry and can have severe long term consequences. All three segments of the power sector – generation, transmission and distribution are facing several challenges which need to be addressed expeditiously. Absence of a level playing field for the domestic industry to compete with imported electrical equipment, especially from China, is a clear and present threat. Urgent policy interventions are required by both the Central and the State Governments to rev up the growth of the electrical equipment industry.
The 11th Plan period is on the verge of completion and the 12th Plan (April 2012 to March 2017) throws huge opportunities for growth with envisaged investment of USD 300 billion, coupled with exports growth. However, in the medium term; industry is witnessing a decline in enquiries and order finalizations. It has reported a ‘wait and watch’ stand adopted by purchasing bodies including core sectors like cement, steel, etc. due to uncertainty in economic and financial situation in the country.
|Growth Indices for Electrical Equipment Industry|
|Cumulative Growth Compared to same period of previous year|
|Product||Weightage||April – December 2011-12 (% Growth)|
|Overall IEEMA Electrical Equipment Growth Index||100||4.41|