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Hazy Future for Engineering Export Sector

April 24th, 2009 | Author: Assistant

The Indian engineering sector is likely to face further difficulty during the current financial year. The sector has been facing increasing obstacles as a result of the global economic slump. Industry analysts predict that change is not likely to occur in this industry for a while.

According to official estimates, the engineering export sector is anticipated to witness tough times this year as business volumes of small and mid-sized engineering goods companies continue to see a downward trend.

Last year’s scenario

Though the engineering sector saw steady growth in the first two quarters of the last financial year, it failed to maintain a steady growth path in the latter half of the year. As orders from western markets like the US and Europe shrank drastically, Indian engineering companies were compelled to reduce their output levels and resort to lay-offs for cutting costs.

“The worsening market conditions adversely affected the annual growth of the engineering industry in the last financial year. A large number of SMEs engaged in the export of engineering goods witnessed 14% to 20% fall in their operating margins during the year,” says Bhavesh Patel, President, Rajkot Engineering Association (REA).

“Consequently, they were compelled to revamp their production lines and reduce their work hours. Reduced output and declining sales growth also compelled units to lay off their workers,” adds Mr Patel.

Bleak prospects

Experts are of the opinion that the situation is unlikely to improve in the next few quarters. This is primarily due to the fact that the current slump in the domestic and global market is expected to continue for a longer period.

“So far, we have not seen any positive signs both on the domestic and global front, but we expect demand to revive during the latter half of the current financial year,” comments B Das, Spokesperson, Kamal Engineering Works, a small engineering goods exporter in Kolkata.

With testing times ahead for the Indian engineering export industry, SMEs in the sector will have to exercise greater prudence and keep a close watch on global market movements before making strategic business decisions.

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David Parks is a well known author and has written articles on Trade Shows, B2B Portal, Business Directory, suppliers, Manufactures and many other subjects.

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