Manufacturing output likely to drop in Q3: FICCI

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SME Times News Bureau | 28 Dec, 2015
The outlook for India's manufacturing sector for the third quarter ending December appear to be weakening mainly on account of sustained sluggish exports, the Federation of Indian Chambers of Commerce and Industry (FICCI) said on Sunday.

"The percentage of respondents expecting higher growth in Q-3 has gone down to 55 percent as compared to 63 percent for Q-2 (July-September 2015-16)," according to a FICCI survey.

"The survey had earlier indicated revival in the manufacturing activity in Q-2 of 2015-16, which seems to be slowing down little bit in Q-3 now," the industry chamber said.

"Exports are primarily responsible for this less optimistic outlook besides domestic factors like poor demand conditions, high interest cost etc.", it added.

The latest quarterly survey gauges the expectations of manufacturers for the October-December quarter for 12 major sectors - textiles, capital goods, metals, chemicals, cement and ceramics, electronics, auto, leather and footwear, machine tools, food, tyre and textiles machinery.

In terms of order books, 44 percent respondents reported higher order books for the third quarter, which is almost the same as that of the previous quarter, indicating subdued demand conditions.

In terms of investment, 68 percent respondents said they do not have plans for making capacity addition for the next six months as compared to 73-75 percent in the previous quarters.

Poor demand conditions, high cost of borrowing, delayed clearances and cost escalation are among the major constraints still affecting expansion plans of the survey respondents.

The export outlook for manufacturing also went downwards in the third quarter, with the proportion of respondents expecting higher exports in the quarter at 24 percent, as compared to 36 percent in the second quarter and 33 percent in the April-June period of the fiscal.

"Though, the proportion of respondents expecting lower exports has also gone down from 43 percent in the second quarter of 2015-16 to 37 percent in the December quarter, the scenario remains bleak as percentage of respondents expecting no change in their export level has also increased," FICCI said.

The survey reported that 10 out of 12 sectors were likely to witness low to moderate growth.

However, the capital goods and auto sectors are likely to see strong growth of over 10 percent in the third quarter, it added.