Industry completely devoid of Pricing Power even as labour costs set to go up: ASSOCHAM

Wednesday, June 17, 2020

New Delhi, 17th June 2020:
The Indian industry has been left completely devoid of ‘Pricing Power’ (PP) across a raft of sectors, struggling with a demand slowdown which only got accentuated by the public health crisis arising out of Covid-19, ASSOCHAM stated, cautioning the trend would likely persist for some more months.
 
On the other hand, the input costs in the form of wages, are likely to shoot up with a large chunk of migrants leaving the manufacturing and trading hubs. 
 
Barring a few food items, most of the ‘Manufactured Products’ have witnessed either negative trends or marginal uptick in the inflation, measured by the WPI for May,2020. “Whether they are textile, leather, wood and products, paper and paper products, chemicals and products, rubber or basic metals, there is a negative inflation, on the Wholesale Price Index (WPI),” ASSOCHAM said.
 
The Chamber Secretary General, Mr Deepak Sood said, “The headline number of negative WPI of minus 3.21 per cent for May, 2020 is a cause of concern for us. Low inflation is something to be desired for, but a negative inflation -either retail or wholesale, reflects disappearance of the Pricing Power of the manufacturers.”
 
He said, given the massive halt to the economy, following two months of lockdown and restrictive re-opening thereafter, the sellers' stress is understandable, but the trend had been building up for the last few months, even prior to the outbreak of the global pandemic.
 
The ASSOCHAM pointed out that while the manufacturers have lost the pricing power, their input costs, especially with regard to wages are expected to shoot up with shortage of workforce. “At this moment, the industry has not started operating at full capacity and are working at 40-60 per cent, depending on the sector (barring essential food items). But as the country starts learning to live with the virus, till a vaccine is found or the curve drops sharply, the industry would find the labour cost shooting up for the next several months with a large chunk of migrants, leaving the manufacturing and trading hubs.” The impact would be more on the small and medium scale industries. 
 
Mr Sood said, the policy makers, including the Reserve Bank of India and the government think tanks should get a clear message from the unfolding trends.
 
“We find ourselves in a situation where both demand and supply sides are getting constrained. That must be addressed sooner than later. Ironically, the industry is starved of cash and slipping further into debt, making it imperative for the government to raise resources through non-tax means and spend it liberally. This is the time for the country to invest in strategic business areas, which can help create long-term value and drive economic growth for the country,” he said.
 

About ASSOCHAM:
ASSOCHAM initiated its endeavour of value creation for Indian industry in 1920. It was established by promoter Chambers, representing all regions of India. Having in its fold over 400 Chambers and Trade Associations, and serving over 4.5 lakh members across India. ASSOCHAM has emerged as the fountainhead of Knowledge for Indian industry, which is all set to redefine the dynamics of growth and development in the Knowledge Based Economy. More information available on www.assocham.org
 
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