Companies cautious over investments in manufacturing sector
Updated: Jul 27, 2013 05:22:06pm
New Delhi, Jul 27 (KNN) Companies are cautious while taking decisions on new investments owing to the sluggish economic growth and deceleration of the manufacturing sector, said a FICCI report.
“In an environment of sluggish economic growth, and deceleration of the manufacturing sector, it is not surprising that the mood exhibited by companies appears cautious. Companies appear to have battened down their hatches and are preparing for a period of uncertainty,” said the report released by FICCI on manufacturing.
Pulled down by poor performance of farm, manufacturing and mining sectors, economic growth slowed to 4.8 per cent in the January-March quarter and fell to a decade's low of 5 per cent for the entire 2012-13 fiscal.
"New investments seem to have been put on hold, with half of the companies surveyed indicating that they had no plans for major investments in FY14," the report which was based on a survey said.
However, majority of the companies surveyed said that they were expecting a revenue growth of over 10 per cent over the next year along with improvement in profit margins.
The report pointed to major concerns raised by firms to include high interest rates, lack of domestic demand, pressure for increased wages, high energy prices and legislative or regulatory pressures.
The manufacturing sector, according to the report has been moving at a slower pace than the overall economy for some time now. As a result, the sector’s contribution to gross domestic product has declined marginally from 16.1 per cent to 15.2 per cent in the five years till March 2013.
Further, growth rate in manufacturing reduced from 9.7 per cent in 2010-11 to 2.7 per cent in 2011-12 and 1 per cent in 2012-13. In FY13, o nly 3.3 per cent of the country’s growth was generated by manufacturing as opposed to 83 per cent contributed by services.
“Much of the focus of new investments is on new product introduction and on R&D initiatives aimed at improving product portfolio and mix to increase margins. In the light of a challenging economic environment, companies are also re-evaluating customer propositions and relationships,” said the report.
Despite uncertainty related to economic conditions, and continued constraints to growth, companies seem to believe that the market may have ‘bottomed out’, with GDP growth in FY14 expected to be higher than in the previous year, it added.
In addition, the companies surveyed appeared confident about their own prospects for growth, with more than 50 per cent largely expecting their own revenues to grow at higher than 10 per cent over the next year and profit margins to improve. (KNN/SD)
“In an environment of sluggish economic growth, and deceleration of the manufacturing sector, it is not surprising that the mood exhibited by companies appears cautious. Companies appear to have battened down their hatches and are preparing for a period of uncertainty,” said the report released by FICCI on manufacturing.
Pulled down by poor performance of farm, manufacturing and mining sectors, economic growth slowed to 4.8 per cent in the January-March quarter and fell to a decade's low of 5 per cent for the entire 2012-13 fiscal.
"New investments seem to have been put on hold, with half of the companies surveyed indicating that they had no plans for major investments in FY14," the report which was based on a survey said.
However, majority of the companies surveyed said that they were expecting a revenue growth of over 10 per cent over the next year along with improvement in profit margins.
The report pointed to major concerns raised by firms to include high interest rates, lack of domestic demand, pressure for increased wages, high energy prices and legislative or regulatory pressures.
The manufacturing sector, according to the report has been moving at a slower pace than the overall economy for some time now. As a result, the sector’s contribution to gross domestic product has declined marginally from 16.1 per cent to 15.2 per cent in the five years till March 2013.
Further, growth rate in manufacturing reduced from 9.7 per cent in 2010-11 to 2.7 per cent in 2011-12 and 1 per cent in 2012-13. In FY13, o nly 3.3 per cent of the country’s growth was generated by manufacturing as opposed to 83 per cent contributed by services.
“Much of the focus of new investments is on new product introduction and on R&D initiatives aimed at improving product portfolio and mix to increase margins. In the light of a challenging economic environment, companies are also re-evaluating customer propositions and relationships,” said the report.
Despite uncertainty related to economic conditions, and continued constraints to growth, companies seem to believe that the market may have ‘bottomed out’, with GDP growth in FY14 expected to be higher than in the previous year, it added.
In addition, the companies surveyed appeared confident about their own prospects for growth, with more than 50 per cent largely expecting their own revenues to grow at higher than 10 per cent over the next year and profit margins to improve. (KNN/SD)
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