Manufacturing outlook is better in Q2: FICCI Survey

The outlook for manufacturing activity in the Julyseptember quarter of the current financial appears to have improved significantly, even as the cost of doing business remains high, according to a survey by industry lobby group Federation of Indian Chambers of Commerce and Industry (Ficci).

“The percentage of respondents reporting higher production in the second quarter of 2021-22 was much above the 50 per cent mark — around 61 per cent. This was significantly higher than last year’s Q2 quarter — around 24 per cent. The percentage of respondents expecting low or same production is 39 per cent in Q2 202122,” the survey said. The outlook was subdued in the first quarter owing to the disruption caused by the second wave of Covid.

The overall capacity utilisation in manufacturing should be 72 per cent in the quarter ending September 30, which is an indication of recovery in manufacturing.

These findings are according to Ficci’s latest quarterly survey that assessed the sentiment of manufacturers for July-september in 11 major sectors — automotive, capital goods, cement and ceramics, chemicals, fertilisers and pharmaceuticals, electronics & electricals, metal & metal products, paper products, textiles, textiles machinery, toys and miscellaneous. More than 300 manufacturing units from both large and SME segments with a combined annual turnover of over ~2.7 trillion participated in the survey.

Industry respondents said that high raw material prices, high cost of finance, uncertainty of demand, shortage of skilled labour and working capital, high logistics cost, excess capacities due to high volumes of cheap imports into India, unstable market, and high power tariff are some of the major constraints affecting their expansion plans. Besides, uncertainty and lockdowns imposed due to Covid-19 have resulted in low domestic and global demand.

According to the survey, the cost of production as a percentage of sales for manufacturers in the survey has risen for 80 per cent of respondents in the second quarter. “This is considerably higher than that reported in Q4 2020-21, where 72 per cent of respondents recorded an increase in their production costs,” it said.

As far as exports are concerned, the outlook seems to be improving, with around 58 per cent of the participants expecting a rise in their outbound shipments during the second quarter. About 30 per cent respondents expect exports to continue to be on the same path as that of the same quarter in 2020-21. The hiring outlook remained subdued as over two-thirds of respondents mentioned that they are not likely to hire additional workforce in the next three months. “This presents a near stable situation in the hiring scenario as compared to the previous quarter of 202122, where 69 per cent of the respondents maintained similar sentiment,’ it said.