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FICCI’s latest Quarterly Survey on manufacturing projects shows that important sectors such as automotive, capital goods, metal and chemicals could continue with a subdued growth outlook for third quarter.
However, overall a modest recovery in manufacturing sector growth in quarter three of 2012-13 (October-December 2012-13) was found in the Survey. Though the growth is expected to be low, some recovery is expected as overall business environment improves with announcement of number of reform measures by the Government, it said.
Low to moderate growth
Based on expectations in different sectors, the Survey pointed out that five out of twelve sectors were likely to witness low (less than 5 per cent) growth and four sectors to witness moderate growth (less than 10 per cent and greater than 5 per cent) in the third quarter.
While sectors likely to witness low growth are chemicals, textiles, machine tools, metals and automotive, sectors such as tyre, ceramics and electronics are likely to witness strong growth of more than 10 per cent in the third quarter.
According to FICCI’s Survey, which drew responses from 364 manufacturing units and associations, modest recovery in the third quarter for the manufacturing sector is expected as demand conditions reflected in order books show a marginal improvement.
The survey gauges the expectations of manufacturers for third quarter (October-December 2012-13) for major sectors such as textiles, capital goods, metals, chemicals, tyres, cement, electronics, automotive, leather & footwear, machine tools, FMCG & Food, Ceramics etc.
It says that around 45 per cent respondents felt that they expect the production to be higher in the quarter under review vis-à-vis last year compared to 44 per cent and 46 per cent in the previous two quarters of current financial year.
Marginal improvement
FICCI survey noted that while the demand conditions remain subdued but a marginal improvement has been seen in the third quarter for 2012-13 as compared to second quarter of 2012-13.
In the third quarter, over 33 per cent respondents reported higher order books for October-December 2012-13 as compared to 31 per cent in the sector quarter of 2012-13. “The above outlook is also borne out by the fact that recently both IIP and Index of Eight Core Industries has shown some upturn in growth,” it said.
Investment, hiring
In terms of capacity addition, around 33 per cent respondents reported plans for capacity addition in next six months as compared to 28 per cent in the previous survey. However, except a few sectors like leather where majority of the firms plan to add new capacities, in other sectors only very few companies have any new capacity addition plans, the survey said adding that “This indicates that investment will not pick-up at least in next two to three months.”
Around 70 per cent respondents do not expect to hire new workforce in the next three months indicating that investors may still be wary of expansion plans. In terms of capacity utilisation, around 34 per cent respondents reported that their capacity utilisation was higher in the third quarter vis-à-vis last year.
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