Improved export outlook to pull mfg growth: FICCI Survey

Top Stories

»	49% Indian startups now from tier 2, 3 cities: Jitendra Singh
»	'India ranks 3rd in global startup ecosystem & number of unicorns'
»	Tripura exported over 9K tonnes of pineapples in 2 years
»	CPI inflation eases to 6.71% in July, IIP falls to 12.3%
»	Rupee depreciates 12 paise to close at 79.64 against US dollar

SME Times News Bureau | 27 Aug, 2016
Apex industry body, FICCI's latest Quarterly Survey on Manufacturing indicates improved outlook for the sector in quarter 2 of 2016-17 (July-September) buoyed by improved outlook in exports.

Export outlook for second quarter's manufacturing also improved slightly as against the expectations for the first quarter. The proportion of respondents expecting higher exports in the second quarter 2016-17 rose by 5 percentage points to 41 percent as against 36 percent in 2016-17, FICCI said in a press statement on Friday in New Delhi.

The survey had earlier indicated a slowdown for the first quarter of 2016-17, which seems to be waning. The proportion of respondents expecting higher growth during the July - September quarter has risen to 55 percent as against 53 percent for April - June quarter 2016-17, although, it remains much below the percentage of 60 percent for January - March quarter of the previous fiscal.

The slight improvement in the outlook for manufacturing production in second quarter of the current financial year is attributable to various factors including somewhat better outlook for exports compared to previous quarters, and better outlook on domestic demand front too, noted FICCI Survey.

The survey that gauges the expectations of manufacturers for Q-2 (July-September 2016-17) for thirteen major sectors namely auto, capital goods, cement and ceramics, chemicals, electronics & electricals, food products, leather and footwear, machine tools, metal and metal products, metal forging, paper products, textiles and technical textiles and textiles machinery, has shown slight improvement in manufacturing sector over the last few quarters due to number of initiatives taken by Government in the last few months. Responses have been drawn from 308 manufacturing units from both large and SME segments with a combined annual turnover of over ₹4 lac crore.

In terms of order books, almost half (49 percent) respondents reported higher order books for the quarter July - September 2016-17 which is more than that of the previous quarter (38 percent).

The milder improvement for the quarter gets reflected in terms of investment as for Q-2 2016-17, 73 percent respondents as against 75 percent respondents in previous quarter reported that they don't have any plans for capacity additions for the next six months. Though the proportion standing against expansion plans is still considerably high but is comparatively lower on a quarter-on-quarter basis. Uncertain economic environment, unfavourable market conditions, competition from imports, delayed clearances, inadequate infrastructure (especially availability of power) and cost escalation are some of the major constraints which are affecting the expansion plans of the respondents. The average capacity utilization as reported in the survey for the total manufacturing sector is around 76 percent for Q-1 2016-17, marginally above the 74 percent for Q-4 2015-16.

Inventory levels remain high with 82 percent respondents maintaining either more or same levels of inventory as their average inventory levels. This is higher than previous quarter, where 76 percent respondents reportedly carried either same or more than their average levels of inventory.

Hiring outlook remains subdued in manufacturing in coming months as three quarters of the participants in Q-2 2016-17 are unlikely to hire additional workforce in next three months. The proportion remains almost similar to that recorded for Q-1 2016-17 (76 percent).

Average interest rate paid by the manufacturers still reportedly remains high and sticky. The rate is as high as 15 percent as per the survey with average interest rate at around 11.5 percent per annum which is similar to that reported in the previous survey.

Based on expectations in different sectors, the Survey suggests that eight out of thirteen sectors were likely to witness low to moderate growth (less than 10 percent). Five sectors, namely capital goods, cement and ceramics, chemicals, metal forging and paper products are likely to witness strong growth of over 10 percent in Q-2 2016-17.