Aug 29, 2019

Why Recession in Construction Sector?

Why Recession in Construction Sector? 

Be careful while spending. Heavy recession ahead.

There is an unannounced financial crisis in India. Such crises appear to the public slowly. I consider the current situation is only the first round of crisis.

1. Increasing the NPA of banks means. Scarcity of capital which means no fresh investment. The glorification of bankrupt law and Continuous scams in companies

2. Homes are not being sold which means the sale of steel, cement, bathroom fittings, construction declining. With these banks, NPAs will grow. These NPAs go deep into individual level by making the crisis deeper,

3. Vehicle sales are declining. At present, the first time in the country sale of two-wheelers is showing negative growth. Maruti has cut down production by 50%. Many of the auto dealers are closing down. This means there is a substantial reduction demand for steel, tyre, and other accessories.

The above three things are meant to be the end of the crores of jobs and the reduction of government's tax revenues. In such a situation, the government becomes frustrated and wants to complete its loss by putting taxes on everything, The government hands over the profits in private hands and puts the deficit in the government account. In such a situation, the government properties are sold in multiples of their favorite corporate and the losses increase.

Crisis in India will be visible around March 2020, Most of the average Indians are unaware of this.  It's time to be careful when you are not able to sell soap, shampoo, and detergent.

For the past few years, even the  FMCG sector is also in the grip of recession-. Do you remember when you have last seen Baba Ramdev's Patanjali Company's advertisement?  Patanjali was most active on TV about 2 years back., but for last one year, the condition of even Patanjali which grew at the fastest pace in India's FMCG market is alarming. Sales of Patanjali's products is shrinking.  Apart from this, Patanjali Ayurveda has shown a 10% Revenue Deficit in FY 2018. Not only companies such as Patanjali but Hindustan Lever also have come down in growth. Demand for fast-selling consumer goods such as soap, toothpaste, hair oil, biscuits, etc. has decreased considerably in rural areas. This has also slowed down the performance of those businesses, which are dependent on healthy rural demand. It includes FMCG, two-wheeler and auto companies that make entry-level cars.

Now come on the transport-According to the report of the Indian Foundation of Transport Research and Training, a 15% drop in truck rentals has reported since November 2018.  Also, Fleet Utilization has dropped more than that. All 75 trunk routes, rentals have gone down substantially. Between April and June, Fleet Utilization has decreased by 25% to 30% compared to the first quarter of last year. This also reduces the income of transporters by about 30%. Many operators may also come in the Fleet's EMI default in the next quarter.

There is a clear impact on freight demand because of a reduction in industrial production. Demand from the manufacturing sector, which contributes the most to truck transport, is at a minimum level. Consumers spending in cities and rural areas have reduced and transportation in agriculture has almost become sluggish after the peak demand of April. In June, the demand for fruits and vegetables by FMCG has decreased by 20%.

Due to the decrease of the freight demand, the truck fleet has reduced by 30% on all major routes of the country in the first quarter.

All the above factors are directly affected to growth, and growth is indirectly affected to the construction industry. each and every growth need more infrastructure like, new building, machinery, roads, water connection, drainage line, electricity, internet, etc. but if any company growing need in fracture but from last few years no any company want more infrastructure another side they are reducing their production, staff, resources, etc. therefore construction industry is affecting more day by day. 

Hope about recession will end early, and all will grow day by day.

(Source: Social Media)

CBEC India

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