The growth momentum in India’s manufacturing sector is likely to have picked up in the September quarter and may sustain for the next six to nine months over rising capacity utilisation, according to the latest quarterly survey on Indian manufacturing sector by Federation of Indian Chambers of Commerce and Industry (FICCI).
The survey shows 61 per cent respondents reporting higher production level in September quarter compared to the same period a year ago as against 55 per cent respondents reporting higher output in June quarter of FY23.
“This is significantly more than the percentage of respondents experiencing higher growth in Q2 of the last few years including pre-Covid years too”, the survey notes.
The survey drew responses from over 300 manufacturing units covering both the large and small & medium enterprises (SME) with a combined annual turnover of over Rs 2.8 trillion across ten major sectors like automotive & auto components; capital goods; cement; chemicals, fertilisers and pharmaceuticals; electronics; machine tools; metal & metal products; paper products; textiles and textile machinery.
The average capacity utilisation in manufacturing was over 70 per cent in the September quarter, reflecting sustained economic activity in the sector.
“The future investment outlook also improved slightly over the previous quarter, as about 40 per cent respondents reported plans for capacity additions of over 15 per cent in the next six months,” the survey noted.
However, the hiring remained below potential with only 36 per cent of respondents looking to recruit additional workforce in the coming three months. Electronics, machine tools and textiles were the only sectors to have reported a ‘positive’ hiring outlook, Others, such as chemicals, fertilisers, pharmaceuticals and capital goods reported a ‘bleak’ hiring outlook.
However the respondents also indicated that they were wary about their expansion plans due to the uncertainty caused by the Russia-Ukraine war, high raw material prices and increased cost of finance.
“Shortage of working capital, high logistics cost due to rising fuel prices and blocked shipping lanes, low domestic and global demand, excess capacities due to high volume of cheap imports into India, unstable market, high power tariff, shortage of skilled labor, highly volatile prices of certain metals”, are some of the major constraints which are affecting expansion plans, the survey noted.