India’s manufacturing sector outlook improved slightly during the first quarter of the current fiscal year, according to Federation of Indian Chambers of Commerce and Industry’s (FICCI) latest quarterly survey on Manufacturing. The percentage of respondents reporting higher production in Q1 increased as compared to the previous quarter.
Suggesting a positive outlook, the survey reported, “The proportion of respondents reporting higher output growth during the April–June 2017-18 quarter has risen from 47 per cent in January-March 2016-17 to 49 per cent. The respondents reporting negative growth have come down to 17 per cent in April – June from 27 per cent as reported in the previous quarter as per the survey.”
Assessing the expectations of manufacturers for the first quarter for eleven major sectors namely auto, capital goods, cement and ceramics, chemicals and fertilizers, electronics, leather and footwear, machine tools, metal, paper products, textiles and technical textiles among others, the survey focused on over 300 manufacturing units from both large and SME segments.
The cause of worry for the manufacturing units seems to be the cost of production, the survey noted. “The cost of production as a percentage of sales for the product for manufacturers in the survey has risen significantly as 69 per cent respondents in Q1 against 60 per cent respondents, reported cost escalation in last quarter. This is primarily due to rise in minimum wages and raw material cost,” stated the report.
In terms of exports, the survey pointed out that the first quarter of outlook had marginally improved as the percentage of respondents expecting a fall during the quarter under review came down from 22.8 per cent in Q4 (2016-17) to 18.5 per cent.
The survey highlighted how a staggering 73 per cent of the sample participants are unlikely to hire additional workforce in the next three months. This proportion reflects a mild improvement over the previous quarter when 77 per cent were reportedly averse to hire the additional workforce.
In addition, the survey predicted moderate growth in metals, leather, footwear, machine tools and capital goods sector during the first quarter.
"Low growth is expected in sectors like chemicals, automotive, textiles and cement. Only in the case of electronics and electrical high growth is expected for Q1 2017-18," the survey said.