n° 166 – May 2020

The country is now entering its latest phase of lockdown, which is expected to be slightly more relaxed than the previous three. Given its size, population and social divide, extraordinary events in India over the last two months have exposed its weaker side in executing mega plans such as shutting off the whole country. The outcomes of several government actions could not have been anticipated, which then required a more herculean effort to mitigate problems arising from them.

A lot of hardship has been created by migrant workers wanting to return to their homes, the puncturing of the informal economy and daily-wagers, and the inadequate, countrywide medical infrastructure for testing and treatment. At a cost of almost doubling its fiscal deficit, the government recently announced the unleashing of a slew of measures to help people and businesses to combat the negative effects of shutdowns. These measures add up to US$ 255 billion, which is roughly 10% of India’s GDP. However, the direct reach of such relief programmes always remains suspect. 

In order to support micro, small and medium-sized enterprises, one of the bazookas fired by government was to ask banks to release to industry collateral-free loans of approximately US$ 40 billion. There has been a minor tinkering with taxes across the board, except for the salaried class. They have given extensions of three to six months on filing tax returns. Most effort has been focused on creating liquidity in the system and not on resurrecting demand. Prime Minister Narendra Modi has issued a clarion call of “AatmaNirbhar” (self-reliant) where the underlying theme is to make local and go global. However, a fall of around 35% in capital goods and consumer durables output clearly shows the prevailing stress. Capital goods production is an indicator of investment activity whereas consumer durables output is a reflection of urban demand. For the first time in the history of an independent India, April was a month of zero sales in the automotive sector. So post-pandemic, the shift needs to be towards spurring domestic demand. Also, there would need to be a metamorphosis in reforms relating to land and labour if India is to create world-class production facilities for world-class products. 

On the business front, the trade is piling up losses on account of lockdowns - as activity in April was a complete wash-out. The month of May has seen a partial reopening of production sites, with outputs at around 20-30%. However, there is disruption where some parts of the supply chain are unable to function.

One of big drains on industry has been the costs incurred on account of detention and demurrage charges on import consignments, which became stuck at various ports as all allied and downstream activity was impaired. Despite government notices, shipping lines and container freight stations (CFSs) refused to comply. Finally, with efforts from the Material Recycling Association of India, the trade secured partial relief from shipping lines but still left were several court actions against CFSs.

The new, emerging challenge is an acute labour shortage - including truck/trailer drivers, scrap sorters and furnace operators - because of a migration back to their home towns. So given the demand contraction, logistical disruptions, liquidity crisis, extra costs and market losses, it is an all-out whammy for our industry. Let us hope that these dark days are behind us soon and that we can get back on the road to recovery. 


Dhawal Shah - Dhawal Shah (India)

Dhawal Shah

Metco Marketing (IND) PVT Ltd, Senior Vice-President of the BIR Non-Ferrous Metals Division

n° 166 – May 2020