The Business Cycle and Process manufacturing business in India

1. Introduction

Over the last few decades, India a world's fastest-growing

economies has witnessed major changes in its industrial sphere.
Significantly, one of the sectors that has played a vital role in driving
this economic recovery is process manufacturing. These industries are
in the process sectors: chemicals, petrochemicals, pharmaceuticals,
and food/beverage/textile manufacturing; This is imperative for even
the government given how dynamic and unpredictable business cycle
in India affects Process manufacturing Business.

The economic or business cycle, also known as trade cycle.

Wavering of economy over time would be more definitive. These
phases are then separated into four cycles - expansion, peak (lasts
around a year), contraction, and trough. During expansion, the
economy expands as businesses invest and employ more workers and
consumer spending increases. Demand Booms: Sustained demand
booms are typical benefits for businesses in process manufacturing.
For example, during economic growth phases a lot of industrial
activities take place and consumers having spending power can drive
up demand for pharmaceuticals and chemicals.

Growth rates stabilize before starting to fall at the peak of

each business cycle. The positive recovery phase is usually
characterized by high levels of production and employment but also
rising costs and potential inflationary pressures. For process
manufacturing companies, this period could indicate a requirement to
streamline production processes and control costs effectively in order
to remain profitable.

The peak is followed by a contraction phase or recession.

The word for millions of unemployed people that stops purchasing
causing an incredible low economic activity. This stage is also quite
difficult for process manufacturing businesses in India. The need for
non-essential goods (e.g., luxury food items, or specialized chemicals)
may drop considerably. Manufacturers may be forced to cut back on
production, pare down inventories, and introduce cost control
measures in their manufacturing facility as a response to the
recession. But the pharmaceuticals are consumables and essentials
their demand could be sustained, making it an area of resilience for
the industry.

The trough phase, on the other hand, is when we reach the

lows of a business cycle before an economy begins recovering again.
This phase could lead to muted demand for process manufacturing
companies in India, but it will also help them gear up for recovery.
Factoring in some vision and tech investment, along with pivoting
products for market share increases during the next boom, can put
companies in a winning position.

The dance of the business cycle and Indian process

manufacturing underpins a nuance between stability, and growth in
strategic adaptability. In other words, businesses must keep an ear to
the ground in response to broader changes and willing to make
adjustments. Government policies, such as fiscal stimulus or
infrastructure investments, also are critical in harnessing the downside
of economic downturns and laying down an environment conducive
to growth.

________________________________________________________
 2.Understanding the Business Cycle

Business cycles are intervals of general expansion followed

by recession in economic performance. The changes in
economic activity that characterize business cycles have
important implications for the welfare of the general population,
government institutions, and private sector firms.
There are numerous specific definitions of what constitutes a
business cycle. The simplest characterization comes from
regarding recessions as 2 consecutive quarters of negative
GDP growth. More satisfactory classifications are provided by,
first including more economic indicators and second by looking
for more informative data patterns than the ad hoc 2 quarter
definition. In the United States, the National Bureau of
Economic Research oversees a Business Cycle Dating
Committee that defines a recession as "a significant decline in
economic activity spread across the market, lasting more than
a few months, normally visible in real GDP, real income,
employment, industrial production, and wholesale-retail
sales."[1]
Business cycles are usually thought of as medium term
evolution. They are less related to long-term trends, coming
from slowly-changing factors like technological advances.
Further, a one period change, that is unusual over the course of
one or two years, is often relegated to “noise”; an example is a
worker strike or an isolated period of severe weather.
The individual episodes of expansion/recession occur with
changing duration and intensity over time. Typically their
periodicity has a wide range from around 2 to 10 years.
There are numerous sources of business cycle movements
such as rapid and significant changes in the price of oil or
variation in consumer sentiment that affects overall spending in
the macroeconomy and thus investment and firms' profits.
Usually such sources are unpredictable in advance and can be
viewed as random "shocks" to the cyclical pattern, as
happened during the 2007–2008 financial crises or the COVID-
19 pandemic.

3. Phases of business cycle

The business cycle is the periodic rise and fall of economic activity,
measured by the gross domestic product (GDP). It's often illustrated
as a wave, with periods of expansion or boom, followed by
contraction or recession. Here are the four stages of the business
cycle:

I. Expansion
The expansion phase is characterized by economic growth. There is
an increase in real GDP, employment, investment, consumer
spending, and corporate profits. Businesses are expanding
production to meet rising demand. This is typically a period of low
unemployment, rising wages, and optimism.

II. Peak
The peak is the highest point of the expansion phase. The economy is
operating at full capacity, and inflationary pressures may begin to
build. The Federal Reserve may raise interest rates to slow down
economic growth and prevent inflation from spiralling out of control.

III. Recession
The contraction phase, also known as a recession, is a period of
economic decline. There is a decrease in real GDP, employment,
investment, consumer spending, and corporate profits.
Businesses are reducing production as demand weakens. This is
typically a period of rising unemployment, falling wages, and
pessimism.
IV. Trough
The trough is the lowest point of the contraction phase. The
economy has reached its bottom, and there are signs that a recovery
is beginning. The Federal Reserve may lower interest rates to
stimulate economic activity.

V. Recovery
The recovery phase is a period of economic growth following a
recession. The economy begins to pick up steam, and there is an
increase in real GDP, employment, investment, consumer spending,
and corporate profits. Businesses are starting to invest and hire
again. This is typically a period of declining unemployment, rising
wages, and cautious optimism.
The business cycle is a natural part of the economy. It's important to
understand the different phases of the business cycle so that you can
make informed business decisions. For example, businesses may
want to expand their operations during the expansion phase and cut
costs during the contraction phase.
Conclusion
This cycle keeps repeating itself, although the length of each phase
can vary. Economists can't predict exactly when a recession might hit
or how long it will last, but understanding business cycles helps them
and policymakers make informed decisions.

4.Factor influencing business cycle

A. Economic Indicators

Economists are like detectives, using clues to understand what's

happening with the economy. These clues are called economic
indicators, which are like gauges on the rollercoaster. Here are some
key indicators we watch.

 (GDP) Gross Domestic Product

This tells us the total value of everything produced in a country. It's

like the overall size of the economy's pie. When the pie gets bigger
(GDP rises), it usually means things are good.In economics, the final
users of goods and services are divided into three main groups:
households, businesses, and the government. One-way gross
domestic product (GDP) is calculatedknown as the expenditure
approachis by adding the expenditures made by those three groups
of users. Accordingly, GDP is defined by the following formula: GDP =
Consumption + Investment + Government Spending + Net Exports or
more succinctly as GDP = C + I + G + NX where consumption (C)
represents private-consumption expenditures by households and
nonprofit organizations, investment (I) refers to business
expenditures by businesses and home purchases by households,
government spending (G) denotes expenditures on goods and
services by the government, and net exports (NX) represents a
nation’s exports minus its imports.

The expenditure approach is so called because all three variables on

the right-hand side of the equation denote expenditures by different
groups in the economy. The idea behind the expenditure approach is
that the output that is produced in an economy has to be consumed
by final users, which are either households, businesses, or the
government. Therefore, the sum of all the expenditures by these
different groups should equal total outputi.e., GDP.

This GVA growth has been mainly due to significant growth

of 9.9% in Manufacturing sector in 2023-24 over -2.2% in 2022-23
and growth of 7.1% in 2023-24 over 1.9% in 2022-23 for Mining &
Quarrying sector. Real GVA and Real GDP have been estimated to
grow by 6.3% and 7.8% respectively in Q4 of FY 2023-24.

 Unemployment rate

This measures the percentage of people who are actively looking for
work but can't find it. A low unemployment rate means more people
are buying things, which keeps the economy moving.

The unemployment rate in India's manufacturing sector saw

fluctuations from 2020 to 2024 due to the impacts of the COVID-19
pandemic and subsequent recovery. In 2020-21, there was a
marginal fall in employment due to the pandemic, but this was offset
by a 7% increase in 2021-22. The number of persons employed in
manufacturing dipped from around 16.6 million in 2019-20 to 16.1
million in 2020-21, then rose to 17.2 million in 2021-22. The sector
showed significant recovery and growth in employment and output
during this period.

 Consumer Spending -: This tracks how much people are

spending on stuff. When people feel confident, they spend
 more, which boosts businesses. But if they're worried, they
tighten their belts, slowing things down. Consumer spending in
the manufacturing business drives demand for goods,
influencing production volumes and economic growth.
Increased consumer spending typically leads to higher demand
for manufactured products, prompting manufacturers to boost
production, invest in new technologies, and hire more workers.
Conversely, reduced consumer spending can lead to decreased
demand, causing manufacturers to scale back production, delay
investments, and possibly reduce their workforce. Consumer
preferences and trends also shape manufacturing strategies,
pushing companies to innovate and adapt their products.
Overall, consumer spending is a critical factor in the health and
growth of the manufacturing sector.

 Consumer spending in India decreased to ₹24,971.79 billion in

the first quarter of 2024 from ₹25,729.57 billion in the fourth
quarter of 2023. This marks a slight decline after a period of
growth.
 By the end of 2023, consumer spending amounted to over
₹25.6 trillion, reaching an all-time high during the recorded
period.

B . Monetary Policy
Monetary policy refers to the actions undertaken by a central
bank, such as the Federal Reserve in the United States or the Reserve
Bank of India, to control the money supply and interest rates in an
economy. Its primary objectives are to manage inflation, control
unemployment, and stabilize the currency.

For example, during a recession, a central bank might implement an

expansionary monetary policy by lowering interest rates and
purchasing government securities. This increases the money supply,
encourages borrowing, and stimulates spending and investment.
Conversely, to combat high inflation, the bank may enact a
contractionary policy by raising interest rates and selling government
securities, reducing the money supply and slowing economic activity.

An instance of this is the Reserve Bank of India cutting the repo rate
(the rate at which it lends to commercial banks) during the COVID-19
pandemic to boost economic activity by making loans cheaper.
c. fiscal policy
Fiscal policy involves government spending and taxation decisions
aimed at influencing economic activity. It plays a key role in
managing the business cycle, which consists of periods of economic
expansion and contraction.

During a recession, the government may implement an expansionary

fiscal policy by increasing public spending and cutting taxes. This
injects more money into the economy, boosts consumer demand, and
stimulates business investment, thereby fostering economic recovery.
For example, during the 2008 financial crisis, many countries,
including the United States, increased infrastructure spending and
provided tax rebates to households to spur demand and create jobs.

Conversely, during periods of economic expansion when inflation is a

concern, the government might adopt a contractionary fiscal policy.
This involves reducing public spending and increasing taxes to cool
down the economy and control inflation. For instance, to combat high
inflation in the early 1980s, the U.S. government reduced spending
and increased taxes, which helped to stabilize prices but also led to a
temporary slowdown in economic growth.
D . Global Events
The business cycle of process manufacturing in India is
significantly influenced by both domestic factors and global events.
Domestically, factors such as government policies, infrastructure
development, availability of raw materials, and labor conditions play
critical roles. Process manufacturing, which includes industries such
as chemicals, pharmaceuticals, and food processing, often requires
consistent inputs and efficient processes. Government initiatives like
the "Make in India" campaign have aimed to bolster manufacturing,
but challenges like regulatory hurdles and infrastructure bottlenecks
remain. Globally, events such as trade wars, economic downturns, and
geopolitical tensions can disrupt supply chains and impact export
demand. For instance, the COVID-19 pandemic caused significant
disruptions in global supply chains, leading to shortages of raw
materials and affecting production schedules. Additionally, shifts in
global trade policies, such as changes in tariffs and trade agreements,
can either open up new opportunities or pose challenges for Indian
manufacturers. Overall, the interplay between domestic conditions
and global events creates a dynamic environment for process
manufacturing businesses in India, necessitating adaptive strategies to
navigate through various phases of the business cycle.
for example, led to widespread disruptions in supply chains, causing
shortages of essential inputs and delaying production timelines.
Additionally, shifts in global trade policies, such as the imposition of
tariffs on Chinese goods by the United States, can alter trade
dynamics and create both challenges and opportunities for Indian
manufacturers. As a result, the business cycle in this sector is
characterized by periods of expansion and contraction influenced by a
complex mix of local and international factors.

E. Government policy
Government policies play a crucial role in shaping the business
cycle of process manufacturing businesses in India. The Indian
government has implemented various policies to promote industrial
growth and stability, which directly impact the process manufacturing
sector, encompassing industries such as chemicals, pharmaceuticals,
and food processing.

The "Make in India" initiative is one of the key policies aimed at

transforming India into a global manufacturing hub. This initiative
encourages both domestic and foreign companies to manufacture their
products in India, offering incentives such as tax benefits, simplified
regulatory processes, and financial support. Additionally, the
Production Linked Incentive (PLI) scheme provides financial
incentives to boost the manufacturing and export of specific products,
further driving growth in the sector.

The implementation of the Goods and Services Tax (GST) has

significantly impacted the business cycle by unifying the tax structure
across the country, reducing the complexity of doing business, and
promoting efficiency. Infrastructure development projects like
Bharatmala and Sagarmala enhance logistics and transportation
networks, improving supply chain efficiency and reducing costs for
manufacturers.

Furthermore, the government has focused on labor reforms and skill

development initiatives to ensure a steady supply of skilled workers
for the manufacturing sector. Programs such as Skill India aim to train
millions of people in various trades, enhancing the labor pool's quality
and availability.

However, challenges remain, such as inconsistent policy

implementation and bureaucratic red tape, which can hinder growth
and stability. Despite these challenges, government policies continue
to be a pivotal factor in driving the business cycle of process
manufacturing businesses in India, influencing periods of expansion
and contraction within the industry.

F. Technological Changes
Technological changes are a driving force in the business cycle
Advancements in technology, such as automation, artificial
intelligence (AI), and the Internet of Things (IoT), are transforming
how manufacturing processes are designed, executed, and managed.
These innovations can lead to significant improvements in efficiency,
quality, and cost-effectiveness, ultimately impacting the business
cycle by fostering periods of growth and modernization.

Automation and AI are increasingly being integrated into

manufacturing operations to streamline production processes, reduce
human error, and enhance precision. For example, automated
assembly lines and AI-powered quality control systems can
significantly increase production speed and consistency, reducing
downtime and waste. This not only boosts productivity but also
enhances competitiveness in the global market.

The adoption of IoT in process manufacturing allows for real-time

monitoring and management of manufacturing equipment and
processes. IoT-enabled devices can collect and analyze data to predict
equipment failures, optimize maintenance schedules, and improve
overall operational efficiency. This predictive maintenance reduces
unexpected downtime and extends the lifespan of machinery, leading
to cost savings and increased production reliability.

Furthermore, advancements in digital technologies, such as digital

twins and smart manufacturing, enable manufacturers to create virtual
models of their production processes. These digital replicas allow for
simulations and optimizations before implementing changes in the
physical production line, reducing risks and improving efficiency.

However, the adoption of these technologies requires substantial

investment in infrastructure and training. Small and medium-sized
enterprises (SMEs) in India may face challenges in accessing the
necessary resources to implement advanced technologies.
Government initiatives and policies, such as the "Digital India"
campaign and incentives for technology adoption, play a crucial role
in supporting businesses in this transition.

Overall, technological changes are a key factor in shaping the

business cycle of process manufacturing businesses in India. By
driving innovation and efficiency, these advancements can lead to
periods of rapid growth and transformation, positioning Indian
manufacturers to compete effectively on the global stage.

THEORIES OF BUSINESS CYCLES

 We have explained above the various phases and common
features of business cycles. Now, an important question is what causes
business cycles. Several theories of business cycles have been
propounded from time to time. Each of these theories spells out
different factors which cause business cycles.

1. Pure Monetary Theory

The traditional business cycle theorists take into
consideration the monetary and credit system of an economy to
analyze business cycles. Therefore, theories developed by these
traditional theorists are called monetary theory of business cycle.
The monetary theory states that the business cycle is a result of
changes in monetary and credit market conditions. Hawtrey, the
main supporter of this theory, advocated that business cycles are
the continuous phases of inflation and deflation. According to him,
changes in an economy take place due to changes in the flow of
money.

For example, when there is increase in money supply, there would

be increase in prices, profits, and total output. This results in the
growth of an economy. On the other hand, a fall in money supply
would result in decrease in prices, profit, and total output, which
would lead to decline of an economy. Apart from this, Hawtrey
also advocated that the main factor that influences the flow of
money is credit mechanism. In economy, the banking system plays
an important role in increasing money flow by providing credit.

An economy shows growth when the volume of bank credit

increases. This increase in the growth continues till the volume of
bank credit increases. Banks offer credit facilities to individuals or
organizations due to the fact that banks find it profitable to provide
credit on easy terms.

The easy availability of funds from banks helps organizations to

perform various business activities. This leads to increase in
various investment opportunities, which further results in
deepening and widening of capital. Apart from this, credit provided
by banks on easy terms helps organizations to expand their
production.

1. Keynes’ Theory of Business Cycle

J M. Keynes in his seminal work ‘General Theory of
Employment, Interest and Money’ made an important contribution to
the analysis of the causes of business cycles. According to Keynes,
the changes in the level of aggregate effective demand will bring
about fluctuations in the level of income. The aggregate demand is
composed of demand for consumption goods and demand for
investment goods. According to Keynes, propensity to consume is
more or less stable in the short run. Private investment however
depends upon profit motive and business expectations about the
economy. Thus fluctuation in aggregate demand depends primarily
upon fluctuations in investment demand. Multiplierplays a significant
role in causing magnified changes in income following a reduction or
increase in investment. Keynesian theory however fails to explain the
cumulative character of business cycle. For example, suppose that
investment rises by 100 rupees and that the magnitude of multiplier is
4. From the theory of multiplier, we know that national income will
rise by 400 rupees and if multiplier is the only force at work that will
be the end of the matter, with the economy reaching a new stable
equilibrium at a higher level of national income. But in real life, this
is not likely to be so, for a rise in income produced by a given rise in
investment will have further repercussions in the economy. This
reaction is described in the ‘principle of accelerator’ (accelerator is
the impact of income on investment). Samuelson combined the
accelerator principle with the multiplier and showed that the
interaction between the two can bring about cyclical fluctuations in
economic activity.

2. Schumpeter’s Innovation Theory of Business cycles

 Joseph Schumpeter considered trade cycles to be the result
of innovation activity of the entrepreneurs in a competitive economy.
Schumpeter calls the equilibrium state of the economy as a “circular
flow” of economic activity which just repeats itself period after
period. The circular flow of economic activity gets disturbed when an
entrepreneur successfully carries out an innovation. According to
Schumpeter, the primary function of an entrepreneur is innovation
activity which yields him/ her real ‘profit’. According to Schumpeter,
introduction of a major innovation leads to a business cycle. As the
innovator-entrepreneur begins bidding away resources from other
industries, money incomes increase and prices begin to rise thereby
stimulating further investment. As the innovation steps up production,
the circular flow in the economy swells up. Supply exceeds demand.
The initial equilibrium is disturbed. There is a wave of expansion of
economic activity. This is what Schumpeter calls the “primary wave”.
This primary wave is followed by a “Secondary wave” of expansion.
This is due to the impact of the original innovation on the
competitors. You can imagine the impact of innovation if you relate it
to some real life examples such as the Internet, mobile phone, and on-
line transactions. As the original innovation proves profitable, other
entrepreneurs follow it in “swarm-like clusters”. Innovation in one
sector induces innovations in related sectors. Money incomes and
prices rise. As potential profits in these industries increase, a wave of
expansion in the whole economy follows. This period of prosperity
ends as soon as ‘new’ products induced by the waves of innovations
replace old ones. Since the demand for the old products goes down,
their prices fall and consequently their producer-firms are forced to
reduce their output. When the innovators begin repaying their bank
loans out of the newlyearned profits, the quantity of money in
circulation is reduced as a result of which prices tend to fall and
profits decline.
Economic Growth
In this atmosphere, uncertainty and risks increase. Recession
sets in. The economy cannot continue in recession for long.
Entrepreneurs continue search for profitable innovations. The natural
forces of recovery bring about a revival.

Process Manufacturing
What is process manufacturing ?
Process manufacturing is a method of combining supplies, such as
ingredients or raw materials, and using a predetermined formula or
recipe to produce something. The process manufacturing production
method is commonly used in bulk production and follows sequential
steps. The list of items that are produced by process manufacturing is
varied. One example is food and beverages, but it can also be found in
oil refining, the production of gasoline, pharmaceuticals, personal
care products, cosmetics, specialty chemicals, plastics, metals, paints
and even alcohol. When doing process manufacturing, it’s important
to follow specific steps. One step must be completed before starting
the next step. There are also specific conditions that process
manufacturing must follow regarding heat, time and pressure. These
conditions result in thermal or chemical changes that are irreversible.
Process manufacturing is permanent, which is why production must
be followed with precision. Controlling process manufacturing
production is assisted by project management software.
ProjectManager is award-winning project management software with
powerful kanban boards that visually map out manufacturing
processes to ensure everything is done properly. You can create
unique boards to track different processes and use in-depth task cards
to attach files, collaborate with your team and catch bottlenecks to
avoid delays. Try ProjectManager free for 30 days.

Benefits of Process Manufacturing

 We’ve already touched on the advantages of process
manufacturing, but it’d be a disservice to not dig deeper into
explaining the benefits. For one, it’s cost-effective. Manufacturing
used to make things by hand or construct complex individual products
that needed many unique parts. Process manufacturing works in bulk
without substantial human labor. It decreases labor costs, adds
efficiency and, by so doing, increases the profit margins.
Another benefit of process manufacturing is that it makes the
allocation of costs easier, allowing for the logical administration of all
aspects of the production line. This helps businesses allocate
resources when needed. It also helps managers make adjustments and
collect data from various points along the process, enabling them to
make better decisions.
Process manufacturing makes product targets and procedures
transparent. This allows teams to know what they need to do and
supervisors can assess their performance accordingly. In other words,
it improves communication and staff morale. Keeping the lines of
communication open also allows for feedback from the people on the
production line, which can lead to greater efficiency in terms of
manufacturing processes, further improving staff motivation and
focus on objectives.
The goal of process manufacturing is to make production simple
without sacrificing quality, which is why it embraces automation.
That removes human error from production and, with close
monitoring, captures issues that can be documented, traced to their
origins and resolved. It also leads to improved safety on the
production line.

Process Manufacturing Examples

Knowing process manufacturing by defining it and its benefits is
only part of the larger picture. Exploring the various industries that
use it and showing examples of how it’s applied can broaden our
understanding. Let’s look at a few process manufacturing examples in
some of the major industries that use the production method.
Pharmaceutical Industry
 Process manufacturing is used in the pharmaceutical industry for
both over-the-counter and prescription medications. These require
high levels of quality control management to closely monitor the
sophisticated formulation. It’s also highly regulated by the
government, which further requires quality control. Operations can
include blending, granulation, milling, coating, tablet pressing, filling
and others.
Food & Beverage Industry
The food and beverage industry also uses process manufacturing
as well as the packaging companies that allow the food and beverages
to be distributed. You can find its use in dairy and meat products,
commercial baked goods, sauces, alcoholic beverages and juices,
among others. Process manufacturing focuses on recipe development
and maintenance. But there are also manufacturing systems and the
use of quality control management that are required to meet health
regulations.
Chemical Industry
The chemical industry, often bundled with tire and process and
abbreviated as CTP, makes up a large portion of manufacturing. It
uses process manufacturing to convert raw materials into final and
intermediate products. Chemical industries will also incorporate batch
manufacturing. That is, a refinery output can go straight to a chemical
plant, a petroleum chemical facility or used for raw materials when
manufacturing tires.

Process Manufacturing vs. Discrete Manufacturing

We’ve learned that process manufacturing is about creating recipes to

produce a product. It includes products such as food and beverages,
chemicals and others that are made by combining supplies,
ingredients or other raw materials according to a formula.
Discrete manufacturing, on the other hand, produces a product using
the same parts and the same quantities. The finished product is always
the same. It uses standard, specific parts and if a part isn’t meeting
quality standards, it’s rejected. This contrasts with in-process
manufacturing where quality control detects a variance and the
formula is adapted to bring the final product up to specification.
Yields can vary in process manufacturing, while discrete
manufacturing produces an exact amount of finished products. The
basic difference can be boiled down to process manufacturing relies
on formulas and discrete manufacturing assembles parts in a
prescribed process to produce a distinct item.

Historical Overview
India's economic history showcases significant phases influenced by
various policies and global economic conditions. During the colonial
era, India's GDP growth was stagnant, averaging around 0.5%
annually from 1900 to 1947 due to exploitative British policies. Post-
independence, India adopted a mixed economy with state-led
development, focusing on industrialization through Five-Year Plans.
For example, during the Second Five-Year Plan (1956-1961), the
focus was on rapid industrialization, leading to an average annual
GDP growth of about 4.2%. However, the period of the "License Raj"
(1947-1991) involved extensive government control over production
and investment, resulting in inefficiencies and an average GDP
growth rate of around 3.5%, often termed the "Hindu Rate of
Growth." The 1991 economic crisis, marked by a severe balance of
payments crisis, led to significant economic reforms, including
liberalization, privatization, and globalization, which spurred higher
growth rates.

Period Key Features Average Annual

GDP Growth
Pre-Independence Colonial exploitation, 0.5%
(1900-1947) agricultural economy
Early Post- Mixed economy, 4.2%
Independence (1947- Five-Year Plans,
1965) industrialization
License Raj (1965- Heavy regulation, 3.5%
1991) inefficiencies
Post-Liberalization Economic reforms, 6-7%
(1991-present) globalization

Current Economic Climate

India's current economic climate is marked by rapid growth and

challenges. Following the liberalization reforms of the 1990s, India
experienced an economic boom, with GDP growth rates averaging
around 6-7% annually. In recent years, the economy has been driven
by a young population, rising middle class, and a strong services
sector. For instance, in 2019, India's GDP growth was 4.18%, with
significant contributions from the IT and telecommunications sectors.
However, the COVID-19 pandemic severely impacted the economy,
causing a contraction of -7.3% in 2020-2021. The economy is
recovering, with an estimated growth rate of around 9.5% in 2021-
2022, supported by government stimulus measures and a rebound in
consumer demand. Yet, challenges such as unemployment, income
inequality, and inflationary pressures persist.

Government Policies and Their Impact

The Indian government has introduced various policies to stabilize
the business cycle and promote growth. Key reforms include the
Goods and Services Tax (GST) in 2017, which aimed to create a
unified national market by replacing multiple indirect taxes. For
example, GST implementation simplified the tax structure and
improved tax compliance, though it faced initial teething problems.
The Insolvency and Bankruptcy Code (IBC) of 2016 was introduced
to address the issue of non-performing assets (NPAs) and streamline
the resolution process, which helped improve the ease of doing
business. Initiatives like "Make in India" aim to boost manufacturing
and attract foreign investment, while infrastructure projects such as
Bharatmala (road development) and Sagarmala (port development)
focus on enhancing connectivity and logistics. The Digital India
campaign aims to promote digital infrastructure and services,
contributing to financial inclusion and e-governance. While these
policies have had positive impacts on economic efficiency and
growth, challenges in implementation and resistance from various
sectors have been observed.

Major Government Policies and Their Impacts

Policy Year Objective Impact

Goods and Services 2017 Unified national Improved tax
Tax (GST) market, simplified compliance,
tax structure initial
disruptions
Insolvency and 2016 Resolve NPAs, Improved ease
Bankruptcy Code streamline of doing
(IBC) insolvency process business, faster
resolutions
Make in India 2014 Boost manufacturing, Increased FDI,
attract FDI mixed results in
manufacturing
growth
Bharatmala & Ongoi Enhance road and Improved
Sagarmala ng port connectivity infrastructure,
logistics
efficiency
Digital India 2015 Promote digital Enhanced
infrastructure and financial
services inclusion, e-
governance

Imapct of business cycles on process manufacturing in india:

1. Expansion:

= This phase is characterized by an increase in output and employment.

There is also an increase in the demand in the market,
capital expenditure, sales and subsequently an increase in income and
profits. This cycle will continue till there is hundred percent utilization
of available resources.
And the production level will be at the maximum capacity. The
unemployment rates will be zero with the exception of voluntary
unemployment and frictional or structural employment (which is
temporary). In this phase both the prices and cost increase at a
somewhat faster rate. But generally, the public enjoy prosperity and a
higher standard of living. The growth rate will eventually deaccelerate
as the economy approaches its peak.

2. Contraction:

= At the peak of an economy, demand is stagnant. Then very soon,

demand starts falling in certain sections of the economy. This is the
start of the contraction phase of the trade cycle, which is the opposite of
the expansion phase.Even the investment levels and employment levels
decrease along with the demand. Now there is a mismatch between
demand and supply in the market. Once producers become aware of the
shift in the economy they start disinvesting, scaling back operations,
cancelling orders for goods and labour etc.

This will start a domino effect. Now producers of capital goods and raw
materials will also start cancelling orders and holding off investment.At
this turning point in the economy, the prices of the goods also fall.
Income levels decreases which decrease consumer spending as well.
The outlook about the economy is pessimistic and we will see a
contraction in economic activities across all sectors. We call this phase
recession

Case Studies

The Great Depression of 1930s:-

= A notable historical example of a trade cycle is the Great Depression

of the 1930s, which was a severe worldwide economic downturn.
It began after the stock market crash of 1929 and lasted until the late
1930. This period was marked by significant decline in industrial
production, international trade, and employment, as well as deflation in
almost every country.

Real GDP fell 29% from 1929 to 1933.

The unemployment rate reached a peak of 25% in 1933.

Consumer prices fell 25%; wholesale prices plummeted 32%.Some

7,000 banks, nearly a third of the banking system, failed between 1930
and 1933.

Another example is post-world war Il economic expansion, also known

as the Golden Age of Capitalism, which was a period of strong
economic growth and prosperity that lasted from the end of world war
Il until the early 1970s.

This cycle show high rate of growth in GDP, income and employment,
and was driven by factors such as technological innovation, and
expansion of consumer goods, production and reconstruction of war-
torn economies.

13 million people became unemployed. In 1932, 34 million people

belonged to families with no regular full-time wage earner.
Industrial production fell by nearly 45% between 1929 and
1932.Homebuilding dropped by 80% between the years 1929 and
1932.In the 1920s, the banking system in the U.S. was about $50
billion, which was about 50% of GDP.

From 1929 to 1932, about 5,000 banks went out of business. By 1933,
11,000 of US 25,000 banks had failed.Between 1929 and 1933, U.S.
GDP fell around 30%; the stock market lost almost 90% of its value.

In 1929, the unemployment rate averaged 3%. Over one million

families lost their farms between 1930 and 1934. Corporate profits
dropped from $10 billion in 1929 to $1 billion in 1932.

Between 1929 and 1932, the income of the average American family
was reduced by 40%.Nine million savings accounts were wiped out
between 1930 and 1933. 273,000 families were evicted from their
homes in 1932.There were two million homeless people migrating
around the country.

Over 60% of Americans were categorized as poor by the federal

government in 1933. In 1932 deflation was 10.7 percent and real
interest rate was 11.49 percent.

New York social workers reported that 25% of all schoolchildren were
malnourished. In the mining counties of West Virginia, Illinois,
Kentucky, and Pennsylvania, the proportion of malnourished children
was perhaps as high as 90%. Many people became ill with diseases
such as tuberculosis.

The 1930 U.S. Census determined the U.S. population to be

122,775,046. About 40% of the population was under 20 years old.
Suicide rates increased; however, life expectancy increased from about
57 years in 1929 to 63 in 1933.

Indian bicycle Industry – Hero Cycle:

ABSTRACT:

Hero Cycles started with manufacturing cycle components slowly

paving its way onto becoming the one of the ‘Best Cycle Brand’ in
India. Today, Hero Cycles is undoubtedly the largest manufacturer of
bicycles in India producing 5.2 million cycles per annum.Starting
from a small unit to creating a huge global footprint, Hero Cycles
production unit in Ludhiana is fully equipped with an in-house R&D
facility producing major bicycle components within its premise under
stringent quality parameters complying with all global standards. The
company focuses on innovation, user friendly & quality products. In
this case we tried to analyze the strong areas, weak points, threats and
opportunities of the company with the help of SWOT Analysis. A
holistic approach is being adopted to understand the environment in
which company’s operating therefore; PEST Analysis Core
competency and Marketing Strategies are studied. This study shows
how it succeeded and stood as a market leader.

KEYWORDS: Hero cycles, pest, swot, strategies, success etc.

INTRODUCTION:

Hero Cycles Ltd was established in the year 1956 and has its
headquarters in Ludhiana, Punjab. It is a manufacturer of bicycles and
bicycle related products.It initially started with manufacturing cycle
components. At present, the company is one of the world's largest
manufacturer of bicycles and producing 19,000 cycles per day. The
company based in Ludhiana, is fully equipped with in house research
and development facilities. Their most modern and sprawling unit in
Ludhiana produces all major components that include frame, fork,
rims, handle and mudguards and many such things within their
premises under strict quality parameters that match the global
standards. They were also the first to introduce aluminum frame
bicycles in India. The company has over 250 suppliers network,
approx. 2800 dealerships & over 4,300 employees and moreover ISO
9001 & ISO 14001 certification from BVC of UK and recognized
R&D department by the Govt. of India. Hero Cycles has also entered
into Mid Premium, Premium & Super Premium segment under the
brand names Hero Sprint, Hero Sprint Pro & UT. As part of its
strategy to further cement its position in the fast-growing premium
cycling segment in India.
THE VISION AND MISSION:

The Hero Group are continuously striving for synergy between

technology, systems and human resources to provide products and
services that meet the quality, performance, and price aspirations of
the customers. While doing so, the company maintain the highest
standards of ethics and societal responsibilities, constantly innovate
products and processes, and develop teams that keep the momentum
going to take the group to excellence in everything we do." Hero
Honda’s mission is to strive for synergy between technology,
systemsand human resources, to produce products and services that
meet the quality, performance and price aspirations of customers.
While doing so, company maintains the highest standards of ethics
and societal responsibilities.” This mission is what drives us to new
heights in excellence and helps us forge a unique and mutually
beneficial relationship with all our stakeholders.

Industry Overview:

Bicycle Industry has its existence since decades when it was major
means of personal transportation. With the advancement of
technology, the trend of the bicycle was reduced in India among the
middle and highincome population, but its popularity is returning on
account of the health priorities and adventure cycling sports. The
increasing congestion, urbanization, and sustainability are majorly
driving the growing demand for bicycles all over India. Punjab state
accounted for the largest share in the manufacturing of bicycles which
produced around 10.5 million units in 2017. China bicycle
manufacturer are expected to enter Punjab state and boost the industry
by introducing lightweight technology. Moreover, the distribution
channel has fuelled the growth of India bicycle market, where sales
through online distribution channel is rising at a steep rate and are
expected to take over large market share over the forecast period.
Sales through the bicycle specialty offline stores are still preferred
option by the 80% of the population which belongs to middle and
lower income group and have a higher preference for physical
shopping. Further, the trend of e-bikes is setting up ground for the
growth of new and existing entrants. Globally ebikes are expected to
contribute 50% value share by 2022 to the total bicycle industry.
Brands such as Atlas, Hero Cycles, Avon cycles have huge market
penetration offering low to medium price bicycles and accounted for
around 60% market share in 2017. Brands such as Firefox and
B’Twin from Decathlon are penetrating into high price segment.
Goldstein Market Intelligence analyst forecast that the India bicycle
industry is set to grow at a CAGR of 8.6% over the forecast period of
2017-2030.

HERO GROUP: SUCCESS STORY:

Hero Group has been one of India’s most trusted brands for
several decades now. Hero Cycles has been a market leader in the
standard bicycle category for three decades. It was in 1986 when Hero
Cycles was first named as the largest producer of bicycles by the
Guinness Book of world records. Since then, the company has not
only maintained its lead in the market but has constantly endeavored
to improve its products through persistent research and innovation.
Hero Cycles currently rolls out one bicycle every nine seconds and
has been setting new sales records each year. Keeping pace with the
changing needs of the time, Hero Cycles has entered the premium
bicycle segment in recent years. In 2012, launched UT Edge lifestyle
brand; in 2015 we acquired 'Firefox Bikes' further cementing the
company’s position in the premium bicycle segment. In 2016, the
launch of premium Hero Sprint Pro series augmented Hero’s position
in the lifestyle biking segment. With these strategic moves, the
company now commands dominance in the double-digit growing
premium segment while continuing to maintain its leadership in the
mass segment with over 45% share. In March 2016, Hero Cycles
acquired a majority stake in Sri Lankan bicycle maker BSH Ventures.
This acquisition has given a plant that will manufacture for most of
overseas brands. Earlier in 2015, Hero Cycles had acquired a majority
stake in UKbased Avocet Sports to enter the high-end bicycle market
of Europe.

Hero Cycles Showcases the latest in Bicycle Technology and a

host of new launches at India’s Largest Cycle & Fitness Expo:
World’s largest bicycle manufacturer Hero Cycles is showcasing a
series of its latest brands, from premium to mass products, at the
largest exhibition of India’s bicycle, fitness and sports industry that
opened in Ludhiana. This is the 4th edition of the annual India
International Cycle, Fitness & Outdoor Sports Expo that brings
together the best in bicycles, fitness and outdoor sports equipment
industry.

GRAND STRATEGY

 In the year 2002, they made a tie up with National Bicycle

Industries, a part of Matsushita Group, Japan, for manufacturing high
end bicycles.

 In September2006, the company signed a technical collaboration-

cum-joint marketing agreement with Ultra Motor for producing a new
range of low-speed electric two-wheelers in India.

 During the year 2008-09, the company launched 14 new models and
new set of product for export market.

 Pantaloons Retail India Limited (PRIL) and Hero cycles have come
together to promote the premium segment of Hero bicycles in India.
PRIL, s “Planet Sports” will be the major promoter of Hero cycles.
 The tie up has been done mainly for the high end bicycles which are
being launched in India by Hero Cycles. These high end bicycles will
be sold in Planet sports as well as other shop in shop format including
Future groups Pantaloons, Brand Factory and Sports warehouses.

SWOT ANALYSIS:

STRENGTH  Good customer base

 Strong Brand image

 Quality

 Innovation

WEAKNESS : Unable to fulfil some regions demand.

OPPORTUNITIES: Right time for expanding and existing

capacities.

THREATS  Dumping of materials by china in different parts of the

world

 More players entering into these segment.

CONCLUSION:
Hero Bicycles changes the definition of Bicycles is that now bicycles
are not about the basic traveling machine, it is now more about being
creative. It is the world’s largest manufacturing company of bicycle,
which has registered a phenomenal sale in December by selling more
than 6 lakhs units. This makes the highest one-month selling company
in the history of the bicycle. In comparison to the other cycle
companies in India, it has all the qualities which make it exceptional
from others. Hero cycles with its strategies and innovative ideas it is
satisfying the growing needs of customers with improvised
technology and stood as a market leader.

Strategies for mitigation:

 Stay ahead of the negative consequences of risk and protect their

revenue, reputation, and competitive position.

 Build trust with clients, investors, and other stakeholders by

being able to prove that they’re doing everything they can to
mitigate risk.

 Streamline audits, reduce the likelihood of negative findings,

and make compliance with regulatory requirements easier.

 Increase efficiency by preventing disruptions to business

operations.
 Keep their teams focused on important, strategic work instead of
constantly putting out risk-related fires.

Challenges:

Demand Fluctuations:

During economic expansions, demand for manufactured goods

typically increases, which can strain production capacities and
supply chains. Conversely, during economic contractions,
demand can plummet, leading to underutilized resources and
excess inventory. This cyclical nature of demand requires
manufacturers to be highly adaptable, which can be challenging
without flexible production systems and agile supply chains.

Financial Strain:

Economic downturns can severely impact cash flow and

profitability, especially for manufacturers with high fixed costs.
Reduced revenues can lead to difficulties in meeting financial
obligations, maintaining operational levels, and investing in
necessary upgrades or expansions. Access to credit can also
become more constrained during downturns, exacerbating
financial challenges.

Supply Chain Disruptions:

Business cycles can lead to volatility in raw material prices and
availability. During expansions, the increased demand for raw
materials can lead to higher costs and potential shortages. In
contrast, during contractions, manufacturers may face
disruptions due to lower production volumes, leading to
inefficiencies and higher per-unit costs.

Workforce Management:

Managing a workforce through the ups and downs of business

cycles is challenging. During expansions, there may be a need
for rapid hiring and training, while contractions can lead to
layoffs and reduced workforce morale. Balancing workforce
needs with economic conditions requires careful planning and a
focus on maintaining core talent.

Operational Inefficiencies:

Economic fluctuations can lead to operational inefficiencies. For

example, during downturns, reduced production volumes can
lead to higher per-unit costs and decreased economies of scale.
Conversely, during booms, overextension and rushed
expansions can result in quality control issues and operational
bottlenecks.

Opportunities:
Technological Advancements:

Business cycles often drive innovation as companies seek to

improve efficiency and reduce costs. During expansions,
manufacturers have the capital to invest in advanced
technologies such as automation, artificial intelligence, and the
Internet of Things (IoT). These technologies can enhance
productivity, quality, and flexibility, positioning companies for
greater resilience during downturns.

Market Diversification:

Economic fluctuations provide an impetus for companies to

diversify their markets and products. By exploring new
geographical markets and developing new product lines,
manufacturers can reduce dependency on a single revenue
stream. This diversification helps buffer against the adverse
effects of localized economic downturns.

Cost Optimization:

Downturns force companies to scrutinize their cost structures

and identify areas for improvement. This focus on cost
optimization can lead to leaner operations and better resource
utilization, which benefits companies in the long run. Practices
 such as just-in-time inventory, lean manufacturing, and strategic
sourcing become more prevalent during economic contractions.

Strategic Partnerships and Mergers:

Economic downturns often create opportunities for strategic

partnerships, mergers, and acquisitions. Companies with strong
balance sheets can acquire competitors or complementary
businesses at lower valuations, expanding their market presence
and capabilities. These strategic moves can lead to increased
market share and enhanced competitive positioning.

Sustainability Initiatives:

Increasingly, manufacturers are leveraging business cycles to

focus on sustainability. During expansions, investments in
sustainable practices and technologies can be more easily
justified and funded. These initiatives not only improve
environmental performance but also lead to cost savings and
compliance with regulatory standards, which are increasingly
important to consumers and stakeholders.

Role of technology and innovation:

 Accelerating Decision-Making:-
 = Technological innovation helps accelerate decision-making
processes within businesses. With the introduction of advanced
data analytics and artificial intelligence, businesses can now
access real-time information and insights to make informed
decisions quickly. These technologies enable companies to
collect, analyse, and interpret large volumes of data, allowing
them to identify trends, patterns, and potential risks or
opportunities that may impact their operations.

 Solves Complex Business Problems:-

=Technological innovation in business is essential in solving

complex business problems and driving growth. With the rapid
advancements in technology, businesses now have access to a
wide range of tools and solutions that can help them streamline
operations, improve efficiency, and enhance customer
experiences.

 Ability to Adapt to Change Faster:-

=Staying updated with the new technology innovations in

business can give you a competitive edge over others. Being
well-informed and engaged with these developments positions
you ahead of your competitors.

 Empowering Customer Engagement

=With the advent of digital transformation, modern businesses

now have the ability to connect with their customers on a deeper
and more personalized level. From social media platforms to
chatbots and AI-powered customer service, these technological
advancements allow businesses to provide a seamless and
convenient experience for their customers.

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