India's engineering goods exports may decline due to second wave of Covid infection in Europe

Indian engineering goods exporters are a worried lot.

With news of a second wave of Covid-19 infections hitting Europe — which is ranked third in terms of export volume of engineering goods — there is concern about a dip in sales after a relatively good month in September.

“A second wave of Covid-19 (outbreak) in Europe is extremely concerning as we export over 65% of our goods, of which Europe constitutes 20%,” said Murali Shankar Sambasivam, director at Super Auto Forge.

“As of now, we have not seen any dip in sales because businesses have not been sealed, though there are a lot of social restrictions. Businesses will definitely be closing for the Christmas holidays but we will have to wait and see what the impact will be after that,” he added.

An official of the Engineering Export Promotion Council (EEPC), who did not wish to be named, forecast a dip in sales in November.

Most of the engineering exporting companies were functioning at 60-70% of capacity and exports had touched 60-70% and were steadily rising, he said, but a second wave could mean serious trouble for the sector.

“Our sales were growing in view of some good exports of iron and steel, which pushed the overall export figure in September to pre-Covid-19 levels,” he said. “But now there is a looming fear about what will happen in November if a second wave of Covid-19 hits Europe as it accounts for 20% of India’s engineering exports,” he added.

Since the bulk of Indian engineering exports were to Germany, the UK, France and Italy, a lockdown in these countries could result in a fall in shipments, he pointed out.

In October, EEPC India’s former chairman Rakesh Shah said the country’s engineering exports had dropped by 13.73% in April-September compared to the same period last year.

Engineering exports from India totalled $75.81 billion in 2019-20.

Shah said the industry would be lucky to match those numbers this year, adding that exporters were “keeping their fingers crossed” and hoping the Covid-19 situation in Europe does not worsen.

The industry is in wait-and-watch mode, said Sekar Kannan, business head – exports at Tube Products of India, a unit of Murugappa Group’s Tube Investments of India.

“We currently focus on exports of engineering products used in the infra and auto sector,” he said. “We saw good pick up in the last few months, but we are now noticing a decreasing trend owing to the second wave of Covid-19. The fourth quarter of this fiscal could be an issue,” he said.

Gautam Maini, managing director, Maini Precision Products also said he was closely monitoring the situation.

“Demand from the automotive sector seems to have come back to a great extent, while aerospace business is impacted. The second lockdown has started in Europe, but we will be able to see the impact later as there is lag in terms of exports. We are closely monitoring the situation,” said Maini.

“The trend has been in one direction: recovery. France, UK, Germany have got into a second lockdown and when there is a lockdown, demand could fall. As of now, we have not seen any downturn,” he added.

Companies that rely on parts from European countries are also facing the heat.

“Many local companies that are dependent on component imports from Europe are struggling to fulfil their local demand and high volume of stock is piling up for want of a few components. With December being a holiday month in Europe for many — from December 15 to January 15 — both exporters and importers are worried,” said KE Raghunathan, convenor, Consortium of Indian Associations, which represents several manufacturing and exporter associations.

Despite the pandemic being a cause for concern, the market demand for Indian engineering products will always be there, said Rajesh Iyengar, chief executive officer, Lincode Labs, which provides AI-based solutions to manufacturing firms.

Source: https://business-journal.in/industry/indias-engineering-goods-exports-may-decline-due-to-second-wave-of-covid-infection-in-europe-business-journal/

Date: November 11, 2020

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