The murmurs of a slowdown in the Indian economy are getting serious, as one of the largest employers, the food processing sector, has also started experiencing a dip in demand. According to industry insiders, the matter can be more serious for the MSME (micro-, small and medium enterprises) sector, wherein even a smaller dip can lead to huge crisis.

 

Parle, which is one of the largest biscuit manufacturers of the country is expecting a layoff of close to 10,000 jobs on account of an imminent slowdown in the demands. “Though it is claimed that Parle is expecting lay-off of close to 10,000 jobs, it may lay off between 1,000 and 4,000 employees, as the company, which has nine plants, is already into contract manufacturing for a few years,” according to a source close to Parle.

 

Sagar Kurade, former president, All India Food Processors Association (AIFPA), and managing director, Suman Projects Pvt Ltd, said, “There are two categories of products experiencing dip in demand. One is low-margin products, which are experiencing a dip in demand between 5-7 per cent as compared to the first quarter of the last fiscal, and the other one is premium products, which are experiencing a dip between 8-10 per cent.”

 

“There are some internal factors and global trade consequences,” he said.

 

“The internal factors include liquidity problem. The RBI has decreased the repo rates, but the reduction has not percolated down. The banks are focussing more on the MNCs, and the MSME sector is sidelined. And the consumers have started prioritising their spending,” he said.

 

Arpita Mukherjee, professor, Indian Council for Research on International Economic Relations (ICRIER), added that overall economy is facing a slowdown and dip in demand. One of the major factor for this was individual purchasing power, which has taken a beating in recent time.

 

Ram Kutwal of Kutwal Foods said, “There is a slowdown in the food industry, and it has just started. As you must be aware, the automobile industry is going through its worst phase, that has started showing its effect on other industries.”

 

“Food industry, it is generally believed, is recession-proof. But it is not completely true, as everything does not come under essential commodities. For example, milk is essential but ice cream is not,” he added, saying, “However, food industries and in that dairy are the last to get affected in a slowdown.”

 

Kurade stated that to overcome the slowdown, the government need to increase spending, liquidity and prioritise the MSME sector lending, besides rationalisation of taxes.