India’s Manufacturing Sector May Slow Down In Q1: Ficci

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New Delhi: Growth of India’s manufacturing sector may decelerate during the June quarter due to factors like bleak export outlook, poor demand and high cost of borrowing, according to a survey by industry body Ficci.

The hiring outlook for the sector also looks unpromising as over 80 per cent survey respondents said they are unlikely to hire in the said quarter, the industry body said.

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The outlook for export continues its downward trajectory in the first quarter of 2016-17 with the proportion of respondents expecting higher exports in the quarter falling. The proportion of respondents expecting higher exports in the first quarter 2016-17 is 36 per cent which is much lower than 41 per cent in the fourth quarter of 2015-16, the survey noted.

Besides, only 38 per cent respondents have reported higher order books for the April-June quarter which is less compared to the previous quarter (44 per cent).

In terms of investment, for Q1 2016-17, 75 per cent respondents as against 68 in the previous quarter reported that they don’t have any plans for capacity additions for the next six months implying a slack in private sector investments in manufacturing to continue.

It added that “interest rate paid by the manufacturers seems to have moderated in the last few months, however it still remains high”.

“The interest rate ranges from 6 per cent to 15 per cent with average rates being around 11.4 per cent per annum compared to 11.8 per cent in the previous survey.”

Capacity utilization has improved in cement, food, capital goods and electronics sector. On the other hand, in chemicals, textiles machinery and tyres it (capacity utilization) has remained same.

The quarterly survey gauges expectations of manufacturers for April-June for thirteen major sectors namely textiles, capital goods, metals, chemicals, cement and ceramics, electronics, auto, leather and footwear, machine tools, food, tyre, paper and textiles machinery.

Responses have been drawn from 308 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 4 lakh crore.

According to data released by the Central Statistics Office, the manufacturing sector, which accounts for over 75 per cent of the index, declined by 1.2 per cent in March against a growth of 2.7 per cent in corresponding period a year ago.

The sector has not done well in 2015-16 as it grew at meagre rate of 2 per cent against 2.3 per cent in the previous year.

The survey had also indicated revival in the manufacturing activity during the March quarter.