Liquidity Crunch, Muted Infra Spending Remain The Two Major Challenges For Manufacturing
The Hindu Business Line|December 28, 2019
Firming prices and revival of demand for steel and cement are expected to boost the sector in the coming year
Suresh P Iyengar
Liquidity Crunch, Muted Infra Spending Remain The Two Major Challenges For Manufacturing

The manufacturing sector, which is emerging out of a historic slowdown, is facing yet another challenging year in 2020, with tightening credit flow from banks and the government cutting down spending on infrastructure projects.

While the Reserve Bank of India (RBI) claims that bank loan to corporates and individuals in November has grown 7.9 per cent year-on-year, it was up only 0.43 per cent to ₹97.67 lakh crore between March and November. This is despite liquidity of ₹2 lakh crore in the banking system, after a series of repo rate cuts of up to 110 points by the RBI since April.

Firming steel prices

Thanks to the Government’s stimulus package, the demand for steel and cement — a key indicator of economic activity — has shown signs of improvement in the last two months, resulting in steel prices going up by ₹3,000 a tonne.

Given the firming steel prices globally and signs of green shoots in the domestic markets, companies are already contemplating a third price hike in as many months, and the price is expected to go up by ₹1,000 a tonne in January.

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