The growth momentum picked up by India’s manufacturing sector in the past few months is likely to be sustained for the next six to nine months on the back of rising capacity utilisation, according to the latest FICCI Quarterly Survey on Manufacturing. It added that after experiencing the revival of the Indian economy in 2021-22, momentum of growth continued in subsequent quarters of Q1 (April-June 2022-23) and Q2 July-September (2022-23).
“Over 61 per cent respondents reported higher production levels in Q2 (July-September 2022-23). This is significantly more than the percentage of respondents experiencing higher growth in Q2 of the last few years including pre-COVID-19 years, too. This assessment is also reflective in order books as 54 per cent of the respondents in Q2 (July-September 2022-23) had higher number of orders,” according to the FICCI Quarterly Survey on Manufacturing.
FICCI’s latest quarterly survey assessed the sentiments of manufacturers for Q2 July-September (2022-23) for ten major sectors namely automotive & auto components, capital goods, cement, chemicals fertilizers and pharmaceuticals, electronics, machine tools, metal & metal products, paper products, textiles, textile machinery and miscellaneous. Responses have been drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of over 2.8 lakh crores.
The existing average capacity utilization in manufacturing is over 70 per cent, which reflects sustained economic activity in the sector. The future investment outlook also slightly improved as compared to previous quarter as close to 40 per cent respondents reported plans for capacity additions in the next six months, by as much as over 15 per cent on average.
Inventories
“A total of 87.32 per cent of the respondents had either more or same level of inventory in Q2 July-September 2022-23, which is same as compared to that of the previous quarter, where around 86.19 per cent respondents expected either more or same level of inventory,” FICCI said.
Exports
It said the outlook for exports seems to be positive as over 42 per cent of the respondents expect a high increase in exports in Q2 2022-23 as compared to the Q2 July-September of FY 2021-22.
Hiring
Hiring, though positive, remains below potential as 36 per cent of the respondents in Q2 2022-23 were looking at hiring additional workforce in the next three months.
Interest Rate
Overall, average interest rate paid by the manufacturers has decreased to 8.37 per cent per annum as against 9.3 per cent p.a. during last quarter and the highest rate at which loan has been raised is 13.5 per cent p.a. High lending rates were reported by around 62 per cent of the respondents, FICCI said.
Workforce Availability
Most sectors have sufficient labor force engaged in their operations and are not facing shortage of labor at factories. While 81 per cent of our respondents mentioned that they do not have any issues with workforce availability, the remaining 19 per cent feel that there is still lack of skilled workforce available in their sector.
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