Ficci: Higher Q3 man­u­fac­tur­ing pro­duc­tion may boost hir­ing

Business Standard - - ECONOMY & PUBLIC AFFAIRS - SUBHAYAN CHAKRABORTY

Higher pro­duc­tion and a bet­ter growth out­look have in­stilled con­fi­dence in man­u­fac­tur­ers in the Oc­to­ber-De­cem­ber quar­ter of 201819 for ramp­ing up hir­ing, ac­cord­ing to a sur­vey of the Fed­er­a­tion of In­dian Cham­bers of Com­merce & In­dus­try (Ficci).

The lat­est quar­terly sur­vey on man­u­fac­tur­ing por­trays a bet­ter out­look for the sec­tor in Q3. The pro­por­tion of re­spon­dents re­port­ing higher out­put growth in the quar­ter was 54 per cent, higher than the 47 per cent re­spon­dents in the same quar­ter of the pre­ced­ing fis­cal year.

On the other hand, the per­cent­age of re­spon­dents re­port­ing low pro­duc­tion dropped marginally to 13.5 per cent, as com­pared to 15 per cent in the same pe­riod of the pre­vi­ous year. As a re­sult, the out­look for the sec­tor slightly im­proved on the hir­ing front. While in Q3 of 201718, 70 per cent of re­spon­dents men­tioned that they were not likely to hire ad­di­tional work­force, this has come down to 65 per cent for Q3 of the cur­rent fi­nan­cial year. Go­ing for­ward it is ex­pected that hir­ing sce­nario will im­prove fur­ther, noted the sur­vey.

Re­sponses have been drawn from over 300 man­u­fac­tur­ing units from both the large and small and medium size seg­ments with a com­bined an­nual turnover of over ~2.2 tril­lion, Ficci said. Firms from 11 ma­jor sec­tors, in­clud­ing au­to­mo­biles, cap­i­tal goods, chem­i­cals, phar­ma­ceu­ti­cals, among oth­ers, said they ex­pect or­der books to re­main sta­ble. While 43 of the firms ex­pect higher num­ber of or­ders, the fig­ure was 42 per cent in the sim­i­lar pe­riod of the pre­vi­ous fi­nan­cial year.

As high as 77 per cent of man­u­fac­tur­ers said their cost of pro­duc­tion as a per­cent­age of sales has risen, up from 62 per cent. In­creased cost of raw ma­te­ri­als, such as crude and op­er­a­tional costs such as power and in­ter­ests have been mostly blamed. In par­tic­u­lar, the av­er­age in­ter­est rates paid by the man­u­fac­tur­ers has risen to 10.6 per cent, against 10.2 per cent dur­ing the same quar­ter of last year. De­spite the re­cent cut in repo rate by the Re­serve Bank of In­dia, the high­est rate of in­ter­est

re­mains as high as 17 per cent, a Ficci of­fi­cial said.

Ex­ports re­main stuck How­ever, only a third of all re­spon­dents ex­pect a rise in their ex­ports. In the lat­est sur­vey, global fac­tors such as in­creas­ing pro­tec­tion­ism have re­sulted in only 36 per cent of par­tic­i­pants ex­pect­ing a rise in ex­ports for the third quar­ter of 2018-19, while 32 per cent ex­pect the same growth as the last year. At the same time, ru­pee de­pre­ci­a­tion has not led to any sig­nif­i­cant in­crease, firms said.

Over­all ca­pac­ity util­i­sa­tion in man­u­fac­tur­ing also re­mains low at 75 per cent in the quar­ter in ques­tion, same as the last few quar­ters, ac­cord­ing to the sur­vey. As a re­sult, Ficci said fu­ture in­vest­ment

out­look, is slightly bet­ter at 47 per cent, up from 46 per cent in the pre­vi­ous year. High raw ma­te­rial prices, high cost of fi­nance, un­cer­tainty of de­mand, short­age of skilled labour, high im­ports, re­quire­ment of tech­nol­ogy upgra­da­tion, ex­cess ca­pac­i­ties, de­lay in dis­burse­ments of state and cen­tral sub­si­dies are some of the ma­jor con­straints that are af­fect­ing ex­pan­sion plans, re­spon­dents said.

In sec­tors such as au­to­mo­tive, cap­i­tal goods, leather and footwear and tex­tiles ma­chin­ery av­er­age ca­pac­ity util­i­sa­tion has ei­ther in­creased or re­mained al­most same in the lat­est quar­ter. Based on ex­pec­ta­tions in dif­fer­ent sec­tors, the sur­vey noted high growth may be seen in cap­i­tal goods, tex­tiles and au­to­mo­tive sec­tors.

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