Manufacturing growth in Oct-Dec quarter to moderate, says Ficci survey

Despite the high decibel 'Make in India' campaign, there is not much good news for the manufacturing sector just yet. A quarterly survey by industry body Ficci, which polled 392 manufacturing units, suggests moderation in manufacturing growth in the October-to-December quarter as compared to the July-to-September period of 2014/15.

There is little improvement in demand, inventory levels remain high, and investment cycles are yet to kick off since capacity remains largely unutilised while the job creation engine is yet to chug.

The survey, which gauges the expectations of manufacturers in 13 sectors, found that the proportion of respondents expecting higher production in the October-to-December quarter has fallen to 52 per cent from 62 per cent in the previous three months.

About 43 per cent reported higher order books for the third quarter of the current fiscal year, a similar number to the July-September period, which indicated little change in the demand environment.

Around 37 per cent said they are carrying more than their average inventory - a percentage higher than the previous three quarters. Twenty per cent respondents reported higher inventory in the July-to-September quarter and 29 per cent in the April-to-June quarter of 2014/15, and 32 per cent in the January-to-March period of 2013/14.

In the absence of demand, existing capacity remains unutilised. Therefore, manufacturers are putting off fresh investment plans. About 74 per cent respondents said they don't have plans for capacity additions for the next six months.

Ficci says the average capacity utilisation in the three months through September remained the same as compared to the previous quarter in sectors such as metals, tyre, textile machinery, and capital goods. Capacity utilisation slightly improved in cement and ceramics, chemicals, textiles and food.

The bad news on the demand side is reflecting on the jobs front. More than 73 per cent respondents in the survey said they are unlikely to hire additional workforce in next three months.

It remains to be seen whether the hiring outlook can dramatically change when the investment cycle kicks in. The survey points out that four sectors - paper, ceramics, machine tools,  leather and footwear - are expected to show strong growth of more than 10 per cent in the three months through December. Also, many greenfield factories, including in sectors such as paper, are investing in more automation, thereby reducing the need for labour.

Business Today had earlier reported that automation at JK Paper's second plant in Odisha's Rayagada has reduced the need for manpower significantly (Rise of the machines). The factory employs just 400 people compared to 1,400 people at its older plant in Rayagada.