India's manufacturing sector shows signs of recovery in July-September quarter: FICCI survey

FICCI's latest quarterly survey on manufacturing points towards recovery of the sector for Q2FY21 as compared to previous quarter. The proportion of respondents reporting higher output during July-September rose to 24 per cent, compared to 10 per cent in Q1. The percentage of respondents expecting low or same production was 74 per cent, which was 90 per cent in the first quarter.  

The survey assessed the sentiments of manufacturers for twelve major sectors, namely automotive, capital goods, cement and ceramics, chemicals, fertilisers and pharmaceuticals, electronics & electricals, leather and footwear, medical devices, metal & metal products, paper products, textiles, textile machinery, and miscellaneous.  

The overall capacity utilisation in manufacturing has witnessed a rise to 65 per cent in Q1 as compared to 61.5 per cent in Q4FY20. The future investment outlook, however, is subdued as only 18 per cent of respondents reported plans for capacity additions for the next six months compared to 22 per cent in the previous quarter.

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The average capacity utilisation has increased in sectors such as automotive, capital goods, metals & metal products, electronics, paper products, and textiles.

High raw material prices, cost of finance, shortage of skilled labor and working capital, high logistics cost, low domestic and global demand due to imposition of lockdown across all countries to contain the spread of coronavirus, excess capacities due to high volume of cheap imports into India, lack of financial assistance, uncertain demand scenario across globe, complex procedures for obtaining environmental clearances, high power tariff, are some of the major constraints which are affecting expansion plans of the respondents, the report highlighted.

Around 77 per cent of the respondents had either more or same level of inventory in July-September 2020, whereas approximately 74 per cent of them maintained either more or same level of inventory in April-June quarter of 2020-21, it said.

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