Manufacturing sector growth to sustain in coming months: FICCI Survey

New Delhi : The growth momentum picked up by manufacturing sector in the last few months is likely to be sustained for the next six to nine months, as assessed by latest FICCI Quarterly Survey on Manufacturing.

FICCI’s latest quarterly survey on Manufacturing reveals that after experiencing revival of Indian economy in the FY 2021-22, momentum of growth continued in subsequent quarters of Q1 (April-June 2022-23) and Q-2 July-Sept (2022-23) with over 61% respondents reported higher production levels in Q-2 (July-Sept 2022-23). This is significantly more than the percentage of respondents experiencing higher growth in Q-2 of last few years including pre-covid years too. This assessment is also reflective in order books as 54% of the respondents in Q-2 (July-Sept 2022-23) had higher number of orders.  

Figure: % of Respondents Expecting Higher Production in the Quarter

vis-a-vis Respective Last Year’s Quarter

Source FICCI Survey

FICCI’s latest quarterly survey assessed the sentiments of manufacturers for Q-2 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.

Capacity Addition & Utilization

1. The existing average capacity utilization in manufacturing is over 70%, which reflects a sustained economic activity in the sector.
2. The future investment outlook also slightly improved as compared to previous quarter as close to 40% respondents reported plans for capacity additions in the next six months, by as much as over 15% on an average.
3. Global economic uncertainty caused by the Russia-Ukraine Warand increasing cases of various mutations of COVID virus worldwide have accentuated the volatilities impacting the major economies. 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 which are affecting expansion plans of the respondents.
4. The table below, gives average capacity utilization for various sub-sectors of manufacturing.  

Table: Current Average Capacity Utilization Levels as Reported in Survey (%)

Inventories

1. 87.32% of the respondents had either more or same level of inventory in Q-2 July-September 2022-23, which is same as compared to that of the previous quarter, where around 86.19% respondents expected either more or same level of inventory.