Weak export outlook weighing down on manufacturing growth: FICCI Survey
Updated: Sep 04, 2015 04:17:38pm
New Delhi, Sept 4 (KNN) Notwithstanding growth in manufacturing in the last few months, manufacturing sector is expected to witness subdued investments at least for a few months more, according to the latest FICCI Quarterly Manufacturing Survey.
The survey noted that only 25 per cent respondents reported any plans for new investments in next six months, a ration which has seen a slight dip in the last few quarters according to the survey.
In terms of investment, the FICCI Survey noted that it remains subdued in manufacturing sector as was the case for previous quarters also. For Q-1 2015-16, 75 per cent respondents as against 73 per cent respondents in Q-4 2014-15 and 74 per cent respondents in Q-3 2014-15 reported that they don’t have any plans for capacity additions for the next six months.
Delay in regulatory clearances, poor demand conditions and high cost of borrowing are some of the major constraints which are affecting the expansion plans of the respondents.
FICCI’s latest quarterly survey assessed various parameters of manufacturers for Q-1 (April - June 2015-16) for thirteen major sectors namely textiles, capital goods, metals, chemicals, cement and ceramics, electronics, auto, leather & footwear, machine tools, Food, tyre, paper and textiles machinery.
Responses have been drawn from 386 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 4 lac crore.
Export outlook for manufacturing has weakened in Q-1 2015-16. In the previous survey, outlook on export front remained positive and seemed to have improved somewhat in Q-4, which does not seem to be the case now. The proportion of respondents with higher exports in Q-1 2015-16 is 33 per cent as compared to 45 per cent in Q-4 2014-15 (January – March) and 43 per cent in Q-3 2014-15 (October – December).
The Survey on Manufacturing indicated less optimism for Q-1 of 2015-16 than in Q-4 of 2014-15 for the manufacturing sector as proportion of respondents with higher production vis-à-vis last year has fallen to 45 per cent in Q-1 from 52 per cent in Q-4. However, at the same time growth is expected to continue. This time it is just not domestic factors but more importantly on export front the outlook seems to be weakening as a result of which manufacturing growth is likely to be pulled down. In terms of order books, 44 per cent respondents have reported higher order books for April – June 2015-16 which is slightly higher than the previous quarter January – March 2014-15 (Q-4) 42 per cent respondents.
On capacity utilization, in some sectors, average capacity utilization has almost remained same in Q-4 of 2014-15 as was in Q-3 of 2014-15. These are sectors like textile machinery and electronics and electricals. On the other hand capacity utilization has slightly improved in Q-4 in chemical, food and leather and footwear sector. The current average capacity utilization as reported in the survey is around 77 per cent for Q-4 which is almost same as the capacity utilizations of previous two quarters i.e. Q-3 2014-15 and Q-2 2014-15.
Interest rate paid by the manufacturers ranges from 8.75 to 14.5 per cent as per the survey with average interest rate at around 12.11 per cent per annum. 50 per cent respondents reported availing credit at over 12 per cent average interest rates.
Inventory levels indicate some improvement vis-à-vis last quarter as currently around 29 per cent respondents reported that they are carrying more than their average inventory levels as compared to 33 per cent respondents in Q4. Another 59 per cent are maintaining their average inventory level which is slightly lower as compared to 61 per cent of previous quarter.
Hiring outlook seems pessimistic in coming months as around 79 per cent respondents are not likely to hire additional workforce in next three months. This proportion is slightly less than that of previous quarter (80 per cent) but still remains too high to consider it as any improvement. (KNN Bureau)
The survey noted that only 25 per cent respondents reported any plans for new investments in next six months, a ration which has seen a slight dip in the last few quarters according to the survey.
In terms of investment, the FICCI Survey noted that it remains subdued in manufacturing sector as was the case for previous quarters also. For Q-1 2015-16, 75 per cent respondents as against 73 per cent respondents in Q-4 2014-15 and 74 per cent respondents in Q-3 2014-15 reported that they don’t have any plans for capacity additions for the next six months.
Delay in regulatory clearances, poor demand conditions and high cost of borrowing are some of the major constraints which are affecting the expansion plans of the respondents.
FICCI’s latest quarterly survey assessed various parameters of manufacturers for Q-1 (April - June 2015-16) for thirteen major sectors namely textiles, capital goods, metals, chemicals, cement and ceramics, electronics, auto, leather & footwear, machine tools, Food, tyre, paper and textiles machinery.
Responses have been drawn from 386 manufacturing units from both large and SME segments with a combined annual turnover of over Rs 4 lac crore.
Export outlook for manufacturing has weakened in Q-1 2015-16. In the previous survey, outlook on export front remained positive and seemed to have improved somewhat in Q-4, which does not seem to be the case now. The proportion of respondents with higher exports in Q-1 2015-16 is 33 per cent as compared to 45 per cent in Q-4 2014-15 (January – March) and 43 per cent in Q-3 2014-15 (October – December).
The Survey on Manufacturing indicated less optimism for Q-1 of 2015-16 than in Q-4 of 2014-15 for the manufacturing sector as proportion of respondents with higher production vis-à-vis last year has fallen to 45 per cent in Q-1 from 52 per cent in Q-4. However, at the same time growth is expected to continue. This time it is just not domestic factors but more importantly on export front the outlook seems to be weakening as a result of which manufacturing growth is likely to be pulled down. In terms of order books, 44 per cent respondents have reported higher order books for April – June 2015-16 which is slightly higher than the previous quarter January – March 2014-15 (Q-4) 42 per cent respondents.
On capacity utilization, in some sectors, average capacity utilization has almost remained same in Q-4 of 2014-15 as was in Q-3 of 2014-15. These are sectors like textile machinery and electronics and electricals. On the other hand capacity utilization has slightly improved in Q-4 in chemical, food and leather and footwear sector. The current average capacity utilization as reported in the survey is around 77 per cent for Q-4 which is almost same as the capacity utilizations of previous two quarters i.e. Q-3 2014-15 and Q-2 2014-15.
Interest rate paid by the manufacturers ranges from 8.75 to 14.5 per cent as per the survey with average interest rate at around 12.11 per cent per annum. 50 per cent respondents reported availing credit at over 12 per cent average interest rates.
Inventory levels indicate some improvement vis-à-vis last quarter as currently around 29 per cent respondents reported that they are carrying more than their average inventory levels as compared to 33 per cent respondents in Q4. Another 59 per cent are maintaining their average inventory level which is slightly lower as compared to 61 per cent of previous quarter.
Hiring outlook seems pessimistic in coming months as around 79 per cent respondents are not likely to hire additional workforce in next three months. This proportion is slightly less than that of previous quarter (80 per cent) but still remains too high to consider it as any improvement. (KNN Bureau)
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