The industries which have been hit hard by the lockdown are taking tentative steps to rebound but the full recovery may take another two to three months.
“The steel sector has been hit hard by the lockdown which is a very manufacturing-based sector and involves lots of transportation and people-oriented. The ore has to be mined and it has to be produced. Most of the steel is used in two or three major sectors automobile, construction, and all the user industry of steel has also been hit badly. So it is not surprising that steel production went down by 33 percent in June and it is taking a longer time to recover than other sectors. The steel will recover when the economy will recover because it is linked to industrial production and new sectors coming up,” says Puneet Jain, Senior Economic Analyst
He highlights that steel production is the barometer of industrial production in India. The industrial activity will come to its pre covid level in the months of September or October definitely in the second half of the current year.
He notes that the companies have already started to restore the manufacturing levels to about 70 percent of their most of the manufacturing operations. Demand is also coming back slowly and the demand is mostly coming from the rural sector which is welcome because a large population of India resides in the countryside. We have seen some rebound in the rural areas in fact uptick in demands. Urban demand is still weak to take off.
He points out that the industry has been demanding a one-time restructuring of loans so that they can realign their debts position in line with their requirements and the cash flows. It is a demand worth considering and the Finance Minister Nirmala Sitharaman indicated that she is seriously looking at it with RBI.
According to him, the government has to ensure that the cash flow to the MSMEs is not hindered because we have seen that the government has announced many schemes yet they complain that the banks are not willing to give them emergency credits.
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