Weak export outlook weighing down on manufacturing growth, says FICCI survey

New Delhi, Sept.7 (ANI): Notwithstanding growth in manufacturing in the last few months, the manufacturing sector is expected to witness subdued investments at least for a few months more, according to the latest FICCI Quarterly Manufacturing Survey.

The survey noted that only 25 percent respondents reported any plans for new investments in next six months, a ration which has seen a slight dip in the last few quarters according to the survey.

In terms of investment, the FICCI Survey noted that it remains subdued in manufacturing sector as was the case for previous quarters also. For Q-1 2015-16, 75 percent respondents as against 73 percent respondents in Quarter four- 2014-15 and 74 percent respondents in Quarter three-2014-15 reported that they don’t have any plans for capacity additions for the next six months. Delay in regulatory clearances, poor demand conditions and high cost of borrowing are some of the major constraints which are affecting the expansion plans of the respondents.

FICCI’s latest quarterly survey assessed various parameters of manufacturers for Quarter one (April – June 2015-16) for thirteen major sectors namely textiles, capital goods, metals, chemicals, cement and ceramics, electronics, auto, leather & footwear, machine tools, Food, tyre, paper and textiles machinery. Responses have been drawn from 386 manufacturing units from both large and SME segments with a combined annual turnover of over Rs.4 lakh crore.

The export outlook for manufacturing has weakened in Quarter one-2015-16. In the previous survey, outlook on export front remained positive and seemed to have improved somewhat in Quarter four, which does not seem to be the case now. The proportion of respondents with higher exports in Quarter one-2015-16 is 33 percent as compared to 45 percent in Quarter four-2014-15 (January – March) and 43 percent in Quarter three-2014-15 (October – December).

The survey on manufacturing indicated less optimism for Quarter one of 2015-16 than in Quarter four of 2014-15 for the manufacturing sector as proportion of respondents with higher production vis-a-vis last year has fallen to 45 percent in Quarter one from 52 percent in Quarter four. However, at the same time growth is expected to continue.

This time it is just not domestic factors but more importantly on export front the outlook seems to be weakening as a result of which manufacturing growth is likely to be pulled down. In terms of order books, 44 percent respondents have reported higher order books for April – June 2015-16 which is slightly higher than the previous quarter January – March 2014-15 (Q-4) 42 percent respondents.

On capacity utilization, in some sectors, average capacity utilization has almost remained same in Quarter four of 2014-15 as was in Quarter three of 2014-15. These are sectors like textile machinery and electronics and electricals. On the other hand capacity utilization has slightly improved in Quarter four in chemical, food and leather and footwear sector. The current average capacity utilization as reported in the survey is around 77 percent for Quarter four, which is almost same as the capacity utilizations of previous two quarters i.e. Quarter three of 2014-15 and Quarter two of 2014-15.

Interest rate paid by the manufacturers ranges from 8.75 to 14.5 percent as per the survey with average interest rate at around 12.11 percent per annum. 50 percent respondents reported availing credit at over 12 percent average interest rates.

Inventory levels indicate some improvement vis-a-vis last quarter as currently around 29% respondents reported that they are carrying more than their average inventory levels as compared to 33 percent respondents in Quarter four. Another 59 percent are maintaining their average inventory levels which is slightly lower as compared to 61 percent of previous quarter.

Hiring outlook seems pessimistic in coming months as around 79 percent respondents are not likely to hire additional workforce in next three months. This proportion is slightly less than that of previous quarter (80 percent) but still remains too high to consider it as any improvement. (ANI)

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