According to the survey, India’s manufacturing sector is set to witness a recovery in the July-September quarter, even blending outlook hiring for the segment.
In the latest quarterly survey by industry body FICCI, the recovery in the manufacturing sector in the second quarter ended in September compared to the previous quarter, pointing to a recovery on the manufacturing sector, which reported higher output with an increase in the percentage of respondents.
The proportion of respondents reporting higher output increased to 24 percent during July-September compared to 10 percent in the previous quarter.
In addition, the percentage of respondents expecting second or less production is 74 percent in the second quarter compared to 90 percent in the first quarter of 2020-21.
However, slightly improving the hiring outlook for the sector, as a vague picture, 80 percent of respondents mentioned that they are unlikely to hire additional workforce over the next three months.
“This presents a slightly improved position in the hiring scenario compared to Q-1 of the previous quarter of 2020-21, where 85 percent of respondents were not in favor of hiring additional workforce,” FICCI said. said.
In addition, the average interest rate paid by the manufacturers has been reduced by 9.2 percent as compared to 9.4 percent per year in the previous year and the highest rate is stated to be 12.5 percent. Lending rates have not decreased as a result of the recent repo rate cut by the Reserve Bank of India, as reported by 55 percent of the respondents.
Based on expectations in various sectors, all sectors except medical devices are likely to report lower growth in Q-220-21. The primary reason for such gloomy expectations seems to be the imposition of intermittent lockouts, demand for sabotage, restricted exports and other guidelines as a response to the COVID-19 outbreak.
The survey covered broad areas of relevance to manufacturing such as exports, capacity utilization, ongoing restrictions, labor / workforce availability and others. There are signs of normalization of operations in many of these areas and may see better performance in the coming months.
The survey covered 12 major sectors namely automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics and electrical, leather and footwear, medical devices, metals and metal products, for July-September 2020-21. The feelings of the manufacturers were evaluated. Paper products, textiles, textile machinery, and miscellaneous.
Responses were received from over 300 manufacturing units from both large and SME sectors with a combined annual turnover of around Rs 3 lakh crore.
The survey showed that overall capacity utilization in manufacturing increased to 65 percent as compared to 61.5 percent in Q4 2019-20.
However, the outlook for future investment is outperformed by only 18 percent of respondents planning capacity additions for the next 18 months, compared to 22 percent in the previous quarter.
High raw material prices, high cost of finance, lack of skilled labor and working capital, high logistics costs, domestic and global demand due to imposition of lockdown in many countries, lack of financial support are some of the major constraints affecting expansion plans. . Of the respondents.
Significantly, the percentage of respondents expecting an increase in exports in July-September has increased significantly by 24 percent compared to the previous quarter, with only 8 percent of respondents expecting an increase in exports. The survey said that 19 percent of exports are expecting that exports will continue like the same quarter last year.
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