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Regional lockdowns curbing migrant labourers' return: Ind-Ra
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SME Times News Bureau | 05 Aug, 2020
Regional lockdowns, imposed by various states, are preventing the return
of migrant labourers to their workplace, thereby impacting several
sectors, such as manufacturing, India Ratings and Research said on
Wednesday.
Acknowledging the necessity of such moves to control
the coronavirus outbreak, the ratings agency, however, said that a
prolonged disruption will even dampen migrant labourers' sentiments.
"The
manufacturing sector will be at the forefront of the disruption,
particularly micro, small and medium enterprises in Maharashtra and
Delhi," it said in a statement.
"Though the labour shortage could
accelerate the automation process wherever feasible, the near-term
challenges in the form of low capacity utilisations, higher production
cost and hence, margin contraction are likely to impact the companies
facing labour shortage due to reverse migration."
According to
Ind-Ra, manufacturing firms in Delhi and Haryana are more susceptible to
the reverse labour migration than firms in Maharashtra and Gujarat.
"The
states of Delhi and Haryana are classified as highly vulnerable with
their respective MDR (Migrant Dependency Ratio) at 93.52 and 51.74
whereas Maharashtra and Gujarat are classified as moderately vulnerable
with their MDRs at 29.19 and 17.12," the statement said.
The agency estimates the manufacturing sector employs close to 6 million inter-state migrant workers.
"Hence,
across different states, the manufacturing sector is exposed to a
higher risk with MDR at 12.86 due to labour shortages driven by
pandemic," the statement said.
"On the other hand, the
construction sector with MDR of 3.72 is more dependent on the
intra-state labour; hence, any operational disruption would be limited,
as intra-state movement of people has been gradually relaxed."
However,
Ind-Ra said that due to the dented demand in the real estate sector,
project execution could be stalled and delayed, affecting the
employability of intra-state labourers.
"Similarly, in case of
the manufacturing sector, the unavailability of skilled labour, which
have moved back to their respective states, has led to significant
pressure on the output, leading to underutilised capacity.
"In
fact, some micro, small & medium enterprises witnessing some demand
recovery from exports are operationally challenged due to the labour
shortage."
As per Ind-Ra, manufacturing cost is likely to
increase in such a scenario, led by either loss of economies of scale or
higher wages of workers, as demand exceeds supply.
"Hence, the margins for such companies could come under pressure in 2QFY21, if not passed on to end-users," the statement said.
In
addition, the ratings agency said that Bihar, which is considered to be
the provider to the country, may face a labour shortage in agriculture.
"Agriculture contributes around 22.2 per cent to the economic
growth of the state and it employs 600,000 migrant labourers in
agriculture," Ind-Ra said.
"Furthermore, the state employs a
total of 8.5 million migrant labourers from the neighbouring states. The
overall impact of reverse migration on agriculture in Bihar will depend
on the portability of the workers who have returned from different
states to Bihar in the agricultural sector."
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