Survey sees a manufacturing slump

So the green shoots of an Indian manufacturing revival now appear exaggerated. Industry body FICCI's new quarterly survey on Manufacturing isn't good news. It indicates a slowdown in the sector for the quarter ending June 2016, because of poor demand conditions and slumping exports.

In fact, going by the survey results of the past two years, no clear trend emerges - hopes of turning India into a 'make' wonderland appear to be see-sawing every quarter.  

The survey polls 308 manufacturing units from 13 sectors -  textiles, capital goods, metals, chemicals, cement and ceramics, electronics, auto, leather & footwear, machine tools, food, tyre, paper and textiles machinery.

The percentage of respondents expecting higher growth in the June quarter this year has dipped; about 53 per cent of those polled expect higher growth now versus 60 per cent in March and 55 per cent in December. The 60 per cent number in March may have signalled a revival but that's a mirage. A quarter with higher expectations is inevitably followed by one with lower hopes (see box).

As far as the June quarter of this year is concerned, capacity utilisation remains the bottleneck. That has implications on the sector's hiring outlook. About 75 per cent of the survey's respondents reported that they don't have any plans for capacity additions over the next six months; that number was 68 per cent in the March quarter.

FICCI, in a media release, says this implies that  the slack in private sector investments in manufacturing would  continue. "Uncertainty in the policies, poor demand conditions, high cost of borrowing, delayed clearances and cost escalation are some of the major constraints which are affecting the expansion plans of the respondents," the body said.

The hiring plan: more than 80 per cent of those polled in June said they are unlikely to hire additional workforce in the next three months. This number is unlikely to change significantly even if growth picks up.

Most of the new capacity when added would have a higher degree of automation as manufacturers embrace Industry 4.0 - the next phase of the industrial revolution where robotics, the Internet of Things, data as well as analytics will play a prominent role.