Click Here Project Reporter QClick Here Digest 2010Click Here Property 200

Euro Zone Crisis

Engineering Exports: Focus On Quality

Euro Zone crisis has thrown up challenges before the Indian Exporters like never before. Already the Indian economy is facing problems of inflation, rupee depreciation and widening of fiscal deficit. The slowdown in demand from Europe and the US is adding to the woes of the Indian exporters. But at the same time the positive can be seen with exploration of the African and Latin American market for Indian Exports. To gauge the impact of euro zone crisis on Indian engineering exports. Project Reporter posed three questions to the industry players through e-mail. Manish Sarda, Director, Sarda Energy & Minerals Ltd and K G Mantri, Sr. VP-Corporate Affairs, Man Industries Ltd has responded to queries posed by Sandeep Sharma. Edited Excerpts...

What can be the impact of Euro Zone crisis on engineering exports in general and your company in particular?
Manish Sarda: The impact of euro zone crisis has sent tremors and shivers across the board may it be steel alloys, auto components, etc . Specifically ferro alloys trade has gone down drastically and will have further impact as there is a huge overcapacity in India which is coming up in Vizag with consumption going down in Europe on the other hand as factories and foundries cut capacity, auto sales have also dropped across the world. For our company we could sense the euro zone weakness since 2008 onwards and we restructured our sales to South East Asia and Japan and we started producing niche grade alloys for Japanese consumption so we were quite unaffected due to the crisis as we had planned our trade shift

K G Mantri: India appears to have a greater exposure to the euro zone than to the US. Naturally, companies having sizeable business in the euro zone, the impact on them will depend on the demand situation in the markets where they have major exposure. As far as Man Industries (I) Ltd is concerned, the company does not have any exposure in either in U.K. or U.S. Hence do not see any impact on our business.

What’s your recommendation for Indian companies to tide over this crisis?
Manish Sarda: For Indian companies to tide over this crisis is primarily to produce high grade and international quality material which is generally accepted world wide as only bunch of producers are doing it currently also they need to innovate there production technology and move forward with better and bigger furnaces so that the cost of production comes down or else get beaten down with rising import bills and power tariffs which is inevitable

K G Mantri: Companies should focus on cost cutting, enhance productivity and remove the bottlenecks to streamline the business. Also, it is the time when Innovation would be a key to sail through the crisis. Also, Indian companies should focus on Domestic market which is least affected by the euro zone crisis. It seems that Indian domestic growth story is to be remain intact because of the domestic consumption, demographics and diversity. Indian Government is also keen on investing and developing the Indian Infrastructure as per the global standards. In India, Pipeline infrastructure Oil, Gas and Water is highly under invested and Gail alone has announced plan of laying 7000 km pipelines across India.

Do you see any opportunity in this Euro Zone crisis for Indian Engineering Exports?
Manish Sarda: I surely see a big opportunity for Indian engineering goods in the wake of rising costs in China as their cost competitiveness is going down day-by-day which will make way for Indian goods. Also Indian goods are having a better quality impression in Europe than the Chinese goods but the key for the future would be to innovate and renovate.

K G Mantri: Indian Engineering Exports should also be equally affected by the euro zone crisis as the demand for the goods will decline, at the same time the world is no more decoupled and Indian major engineering exports are to Euro Zone and U.S. Growth in Indian exports declined to 10.8% at $19.9 billion in October this year, the lowest increase since the same month in 2009 when it contracted by 6.6%, of special concern the drop in the export values of engineering and petroleum products. To address this challenge, Companies should explore new markets including African and south American Markets. In fact, despite brewing European crisis, Indian Exports have done relatively well in the first half of the year largely due to Government consistent efforts to focus on diversifying the export basket & to reduce dependency on ailing economies.


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