Business Today

FICCI manufacturing continues growth momentum amid uncertainties

India’s manufacturing sector continues its growth momentum in the April-June quarter of the current fiscal year, according to the latest quarterly survey by Chamber of Commerce FICCI.

The survey shows that 54.8% of respondents reported higher production levels in the first quarter (April-June 2022-23), with an average expectation of a production increase of over 10%. This is slightly more than the percentage of respondents who reported higher growth in the first quarter of last year. The survey also points to some improvement in job creation by the sector compared to the previous quarter (Q3 of 2021-22) where only 25% of respondents plan to hire in the next few months, 53% of respondents in Q1 Quarter 2022-23 are now considering hiring additional staff over the next three months. This sentiment is also reflected in order books, as 55% of respondents expect a higher number of orders in Q-1 (April-June 2022-23), the survey notes.
The existing average capacity utilization for Q4 2021-22 in the manufacturing sector is 77%, slightly more than 75% in the previous quarter, reflecting increased economic activity in the sector. Future investment prospects have also improved compared to previous quarters, but remain cautiously optimistic, with 40% of respondents saying they plan to expand capacity over the next six months, up 14% on average, it said.

The survey also indicates that India’s manufacturing sector is also affected by global economic uncertainty caused by the Russia-Ukraine war and rising cases of Covid-19 affecting major economies. “High commodity prices, increased financing costs, cumbersome regulations and clearances, lack of working capital, high logistics costs due to rising fuel prices and blocked shipping lanes, low domestic and global demand, overcapacity due to high volumes of cheap imports in India, unstable market, high electricity tariffs, lack of skilled labor , highly volatile prices of certain metals, etc., and other supply chain disruptions are some of the key obstacles hampering respondents’ expansion plans,” it said. While 80% of respondents expect either more or the same inventory in Q1 April-June 2022-23, around 90% of respondents in the previous quarter expected either more or the same inventory.