Indian manufacturing continues growth momentum amid uncertainties: FICCI survey

The Indian manufacturing sector continues its growth momentum in the April-June quarter of the current financial year, says industry chamber FICCI's latest quarterly survey.

The survey reveals that 54.8% respondents reported higher production levels in Q1 (April-June 2022-23), with an average expectation of increase in production by over 10%. This is slightly more than the percentage of respondents experiencing higher growth in Q1 of last year. The survey also indicates some improvement in employment creation by the sector as compared to the previous quarter (Q3 of 2021-22), where only 25% of the respondents were looking at hiring in next few months, 53% of the respondents in Q1 2022-23 are now looking at hiring additional workforce in the next three months. This assessment is also reflected in order books as 55% of the respondents in Q-1 (April-June 2022-23) are expecting a higher number of orders, the survey notes.

The FICCI survey assessed the sentiments of manufacturers for Q1 April-June (2022-23) for twelve major sectors namely automotive, capital goods, cement, chemicals, fertilisers and pharmaceuticals, footwear, machine tools, metal & metal products, paper products, textiles, toys, tyre and miscellaneous. Responses have been drawn from over 300 manufacturing units from both large and SME segments with a combined annual turnover of over ₹3 lakh crore.

The existing average capacity utilisation for Q4 2021-22 in manufacturing is 77%, a little higher than 75% in the previous quarter, which reflects increased economic activity in the sector. The future investment outlook also improved as compared to previous quarters but remains that of cautious optimism, as 40% respondents reported plans for capacity additions in the next six months, by 14% on an average, it says.

The survey also points out that the Indian manufacturing sector is also impacted by the global economic uncertainty caused by the Russia-Ukraine war and increasing cases of Covid-19 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," it says. While 80% of the respondents expect either more or the same level of inventory in Q1 April-June 2022-23, around 90% respondents expected either more or the same level of inventory during the previous quarter.

The outlook for exports seems to be positive as 53.4% of the respondents expect an average increase of 15.2% in exports in Q1 2022-23 as compared to the first quarter of last year.