Manufacturing growth to sustain in next 2-3 quarters: FICCI Survey

The growth momentum picked up by the domestic manufacturing sector in the last few months is likely to sustain for the next two to three quarters, FICCI’s latest quarterly survey on manufacturing revealed on Monday.

The survey said that after experiencing a revival of the economy in FY22, the growth momentum continued in the subsequent quarters of Q1 and Q2 FY23 with over 61 per cent respondents reporting higher production levels in the July-September quarter, the industry association said in a statement.

“This is significantly more than the percentage of respondents experiencing higher growth in Q2 of the last few years including pre-Covid years too. This assessment is also reflective in order books as 54 per cent of the respondents in Q2 FY23 had a higher number of orders,” it added.

The survey assessed sentiments of manufacturers for July-September (2022-23) for 10 major sectors including automotive & auto components, capital goods, electronics and textiles. 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 crore.

Investment outlook

The existing average capacity utilisation in manufacturing is over 70 per cent, which reflects a 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 an average, the survey said.

Global economic uncertainty caused by the Russia-Ukraine War and increasing cases of various mutations of COVID virus worldwide have accentuated the volatilities impacting the major economies.

Major constraints

High raw material prices, increased cost of finance, cumbersome regulations and clearances, 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 etc. and other supply chain disruptions are some of the major constraints that are affecting expansion plans of the respondents, it added.

“The outlook for exports seems to be positive as over 42 per cent of the respondents expect a high increase in exports in Q2 FY23 as compared to the Q2 FY22. Hiring though positive, remains below potential as 36 per cent of the respondents in Q2 FY23 were looking at hiring additional workforce in the next three months,” the findings revealed.

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